Finances play a major role in people’s lives, making loans inevitable for some. This is particularly true for those who are as young as eighteen who wish to pursue higher education.
Even without a college diploma, you and your fellow students have to learn about student loans and how to apply for it. After all, this financial aid system will provide the money you need to put you into university.
It doesn’t stop with student loans, however. The reality is student loans are the first of many loans you will have to apply for in your lifetime. That is why it’s important to learn about the different kinds before or during your stay at university. It helps prepare you for big purchases in the future.
Here are four types of loans you might encounter at some point.
Home Loans
It may not seem likely now, but you might find yourself wishing to buy a house once you reach a certain age, be it your late 20s or early 30s. A first step to accomplishing your first home purchase is figuring out the different home loan options available in your area.
The mortgage comes in different forms, and they have their pros and cons. The Fixed-Rate loan, for example, entails a set amount of monthly payment and interest throughout the payment that usually lasts around 15 to 30 years.
This is the standard time Americans pay their mortgage, even if they applied for an Adjustable-Rate loan. This type of loan offers interest lower than a Fixed-Rate loan for the first ten years of payment. As its name implies, the rate will then adjust after this period.
There’s also the Federal Housing Administration (FHA) loan. This type of loan is suitable for aspiring homeowners who don’t have enough savings for a down payment. Unlike most loan plans that require a 20% down payment, the FHA can go as low as 3%. However, it’s not at all flexible and most FHA loans can only go as high as $400,000.
The type of home loan you can apply for usually depends on your credit score or the state of life you have at that moment.
Auto Loans
Personal vehicles make it easier to get around. You may start looking to purchase a car of your own in the future. Regardless of the model, you’re hoping to buy, auto loans can help pay for it.
Official lenders or the car dealership offers this type of loan. The main difference they’ll have is that some car dealerships offer the loan at a much higher interest.
Additionally, some auto loans ask for collateral, often in the form of your car if you fail to make continued payments.
Payday Loans
Worst case scenario: you have to live paycheck to paycheck when you’re older. At that moment, you may start looking at payday loans to bridge one salary to another.
As enticing as the concept may be, it’s best to stay away from payday loans because of their high interest. It’s also difficult to save up when the principal of this kind of loan is usually a large portion of your next salary.
Small Business Loans
Entrepreneurship is one way of generating profit, even if it has nothing to do with your major now. If you make plans to open your business, then you might want to look at Small Business Loans for help with capital and startup costs.
This type of loan not only helps small businesses open but grow as well. The most trusted kind of small business loans is those guaranteed by the US Small Business Administration (SBA).
When it comes to money, it’s always ideal to make smart decisions. Hence, the need to educate yourself on the different kinds of loans available.
