At some point in time, everyone experiences financial difficulties and this is where loans can help them. In fact, loans are needed every now and then if you belong to certain financial class who cannot spend considerable amount of money at once.
Getting a loan has become easier nowadays. But there are some factors to take into account before settling for a loan. Since there different kinds, it is important to understand them to evaluate which one best fits your financial needs and objectives. This article will guide you over different kinds of loans:
- Installment loans
This is a pretty popular loan which can be paid back in monthly payments covering the interest and principal. Installment loans are taken by homeowners for their personal needs or even by business owners who want to meet their business objectives. Full amount is received when the contract is signed and interest is calculated from that date to the final day. Repayment must be made before the final date or you may have to face additional penalties.
- Balloon loans
These names are commonly written under another name but it can be figured out by the fact that when the contract is signed, you receive the full amount but only interest is paid off during the life of loan. The balloon payment of principal is supposed to pay on the final day. Balloon loans are ideal for businesses who have to wait till a particular date before receiving payment from a clients for its services and products.
- Secured and unsecured loans
Loans can come in two forms, secured and unsecured. If the lender has trust in you and believes that you will be able to repay on time then he may grant an unsecured loan. No collateral is pledged hereby as a secondary form of payment. Secured loans requires some kind of collateral but usually has a lower interest rate as compared to unsecured ones.
- Interim loans
Bankers hereby are more concerned with who will be the payer of the loan and how much reliable the commitment is. These are used to make repeated payments to the contractors who are building new facilities when a mortgage on building is used to pay off the interim loan.
- Open ended and close ended loans
When it comes to open-ended loans, there is a fixed limit line of credit which can be borrowed again once it has been repaid. Credit cards are one type. Close ended loans are loans that cannot be borrowed again like car loans and student loans.
These were few types. There are a number of others like inventory loans, equipment loans, personal loans, guaranteed loans and commercial loans and also you can compare secured loan rates online at finance.co.uk. What the matter of concern here is that one must choose the loans that is supposed to meet their financial objective not only in short term but in the long run as well.