Types of Loans

Personal Loans

Personal Loans differ from other loans in that they are not backed by an asset, such as a car or a house. These are called unsecured loans. They are usually used to purchase smaller items like furniture, computers, and televisions.

Pay Day Loans

Payday loans are very short-term, usually just a couple of weeks. They are designed to give a cash advance until your next payday. The laws are different from state to state, and in some states, payday loans are not allowed, so check to make sure you can legally get a payday loan in your state. Interest is usually very high on these loans, so they are not advised to be used often.

Auto Loans

Auto Loans are called secured loans because they use the car as collateral. This means that if you fail to make your car loan payments, they loan company will come a repossess the vehicle. Auto loans are paid of over a set period of time like three years. The interest is usually figured for the full amount of time, and then the total amount of both the interest and the price of the car is divided into equal monthly payments.

Mortgage Loans

There are two types of mortgage loans. The first type is the initial mortgage loan that pays off your house. Nowadays, there are many different types of mortgages. We will not discuss all of the types here, but usually they are given for either 15 or 30 year terms. The interest and cost of the house are figured together, and then divided into equal monthly payments.

Once you have paid a good portion of your mortgage on your house, you can get a second mortgage. This type of mortgage uses the amount of equity you have in your house as collateral. Equity is the portion of the house value that you have paid off from your first mortgage. Second mortgages can be used to make home improvements, or for any number of other things.