Different Types of Loans You Need to Know About

Taking out a loan is a stressful process. You often aren’t thinking about much else aside from the fact that you need access to cash in a hurry.

There are a variety of reasons why you would need a loan, and with all those reasons comes many options to consider. There are plenty of loans and if you are not careful to understand and learn the differences, you might find yourself in a cycle of debt unable to escape. Here are some loan types you need to know about.

Small Loans

If you are in need of fast cash, small loans can provide you the funds in a tight spot. There are a variety of small loans to consider. Payday loans, for example, are small loans that will require you to pay back the loan in full reasonably quickly, within a month, typically on your payday, hence the name. These types of loans are important because if an emergency was to occur, you cannot always plan for financial stability or flexibility. It is important to note that you do not want to be taking out small loans frequently as these loans tend to carry with them much higher interest rates. 

Cash Advance

Similar to a payday loan, a cash advance will be handling smaller amounts of money. These advances are easier to attain, but because of that, they will have higher fees. One difference between a cash advance and payday loan is that unlike a payday loan, cash advances can come from your financial institution, through the use of your credit card and done online. Loan experts at GreenStarCash will note one other main difference between a cash advance and a payday loan comes in the payment. Unlike a payday loan where the expectation for repayment is relatively quick, your next payday for example, your cash advance loan will appear on your next credit card statement as money owing. 

Secure Loans

Secure loans are a basic form of loans that require the use of collateral to attain the funds. This collateral comes in the form of various types of assets like your home or your car. These valued assets must be the same amount or more of the loan to ensure that the bank or loaning party are covered. This limits the amount of risk for lending out money but can be more risky for those taking out the loan if they are late to come up with the funds. 

Unsecured Loans

If you are looking for a loan that does not require you to provide a sort of collateral, you are then looking at unsecured loans. These types of loans don’t involve placing down any assets in order to take out the loans, but are not free of risk, as failure to pay back your loan would potentially result in the lending party taking you to court to settle the discrepancies. The borrowing rate or interest rate associated with unsecured loans also tend to be typically higher than that of secured personal loans. Additionally, to note, lending establishments will typically be higher in their rates compared to financial institutions like banks. 

No Guarantor

If you are looking to take out a loan, and are looking for something else that will not require collateral, no-guarantor loans are worth looking into. Most loans require you to need someone to take responsibility for you legally if you are not able to pay your loans back. The unfortunate reality is that not everyone has that option or privilege of having someone who is financially stable to sign off for them. These loans will typically be more expensive as well due to the risk involved on the lender’s part. 

Cash Flow

If you are looking for loans for business, you need to understand that there are very different options to consider. One loan specifically made for businesses is a cash flow loan. This is a loan designed for businesses that can meet certain revenue requirements. The benefit of this type of loan is that you don’t require putting down any collateral to qualify. There is not as much clerical or paperwork involved when you are applying for the loan, but there are significant approval requirements that need to be met in order to qualify for them. 

Many people need to take out a loan for one reason or another. Not everyone has the funds or capital to afford things that they need to pay for. Make sure that you know the differences and reasons behind certain loans, and you will be able to make the right choices if you ever find you need to take one out in the future.