The world is so full of choices, isn’t it? You can’t even buy a cup of coffee without being asked which type, so did you think you’d get away easy where a loan’s concerned? Yes, you have to choose the right type of loan too. The lenders will start throwing their jargon at you and just so you don’t end up going tic-tac-toe to decide on your loan, here’s a list that might help you out.
Unsecured Loans
Most of your options will be unsecured. This means the money you borrow will not be secured against an asset. You will have to sign a loan contract, stick to the terms and conditions and pay off the loan accordingly. But in case you don’t pay, the lenders cannot seize any assets as the loan is unsecured.
Secured Loan
This is when the money is lent only when you’re able to provide adequate collateral. If you’re unable to pay off, the lender can easily seize your asset/s as payment.
Overdraft Protection
Credit unions, banks and trust companies offer their customers an overdraft facility. If you have an account with one of these organizations and have built up lender trust, they will allow you to overdraw your deposit account. The amount is usually never more than $1000 but it’s a good way of getting a quick loan. The interest charged usually depends upon the particular lender.
Personal Line Of Credit
A personal line of credit is generally available from banks, trust companies or credit unions. This is like a larger overdraft limit. The lender extends the credit to you but unlike a regular loan, the interest you pay is charged only on the actual amount of money that you use.
Credit Card Advances
If you have a credit card with a financial institution, you can borrow money from them- this is known as a “cash advance”. You don’t have to make an application for this kind of loan. The interest on this money is calculated daily, and is steeper than what is charged on a line of credit or a personal loan.
Demand Loan
This is when you make an application to borrow money from a financial institution. This involves you signing a contract, agreeing to terms and conditions, and paying off the money and the interest (in full) within the specified time period. It’s called as “demand” because the lender can demand that you pay back the money at any time.
Installment Loans
This is probably the first type of credit that comes to your mind when the word “loan” is mentioned. This involves borrowing money from a lender, signing a contract and agreeing to pay back the principal amount and the interest in fixed installments (usually fortnightly or monthly) within a certain period of time. This type of credit could often have certain security requirements.
These are the basic options that you have while considering a consumer loan.