There is a wide variety of consumer loans out there. Some of these loans carry very high-interest rates, while some carry extremely low-interest rates. The timespan of these loans varies considerably as well. Consumer loans let people buy cars, homes, and fund home improvements, higher education, and vacations. Let us examine the types of consumer loans available and how they work in more detail.
Perhaps the most popular kind of consumer loan is a mortgage. A mortgage is simply a loan used to purchase a home. Mortgages have long time spans. They usually last for 15-30 years and have low-interest rates with fixed monthly payments.
To qualify for a mortgage, you need to have a good credit score. You must also provide a down payment in cash or check for the home purchase before approved. Mortgages are available at fixed-rate or adjustable-rate (variable) terms.
Another popular form of a consumer loan is a credit card. Credit cards carry some of the highest interest rates of any consumer loan. They can be used to purchase or pay for almost anything.
Auto loans are loans used to purchase vehicles. Since vehicles cost a lot of money, and most people lack the means to buy cars outright with cash, many take out auto loans to get a car. Auto loans typically carry low-interest rates and have fixed monthly payments. The interest rate of the auto loan will vary based on how good a person’s credit score is. Most auto loans are for new vehicles and last for anywhere between 36-60 months. An auto loan can be given by a dealership selling a car or a bank or any other financial institution.
Student loans are loans used to pay for the costs of higher education. They typically have low-interest rates and fixed monthly payments that are spread out over a long period of time. Most people qualify for student loans, even if they have poor credit.
Personal loans are loans that can be used for anything. This kind of loan is not secured by any property and usually has a shorter length of repayment. Personal loans have lower interest rates than credit cards.
Refinance loans are loans that are used to pay off another loan. The main benefit of a refinance loan is that it lets you pay off a higher interest loan so that you save money. Refinance loans can also be used to reduce the monthly payment or extend the payment length of an existing loan.
The home equity loan is a more complicated loan. It is given to people who have a mortgage that is less than the value of their home. Home equity occurs when the value of a home is worth more than the mortgage. A home equity loan carries low interest and is secured by the home. Another name for a home equity loan is a second mortgage.