Whether you are looking to start your own business, buy equipment, go to college, buy a house or a car, the fact is you need a lot of money. Even though you might have saved up throughout the years, it may not be enough. In situations like these, the smart move would be to consider taking out a loan. However, before you take this step, you need to browse through different types of loans and figure out which one best serves your interests. There are different types of loans, all of them tailored according to different situations and needs. 

Here are 7 types of loans that can help you with your future purchases and decisions:

1. Small business loans

If you are looking to start your own business, then taking out a small business loan is the best choice for you. Small business loans encompass term loans, working capital loans, equipment loans, etc. There are a number of small business loans intended for every financial need that might arise when starting your own business. However, these loans are usually harder to qualify for and require a detail-oriented business plan. 

2. Personal loans

A personal loan is the most popular type of loan because it can be used for a variety of things compared to some loans that can only be used for a specific purpose or product. Personal loans can be used to cover the costs of emergencies – usually medical emergencies, weddings, vacations, home renovations, pricey technological devices, etc. Personal loans, in most cases, don’t require collateral, but that makes them more expensive and harder to get. Secured personal loans that are backed by collateral can be easier to qualify for, and they also offer more favorable interest rates. The repayment terms for both are usually fixed for a few months up to several years. 

3. Auto loans

As the name might suggest, auto loans are used for buying vehicles. The repayment terms vary from several months to a few years and mostly depend on the price of the car. When taking out an auto loan, the vehicle you end up buying will serve as collateral. The downside of this type of loan is that by the time you repay the money, the vehicle will most likely need repairs or replacement. 

4. Mortgage loans

A mortgage loan, also called a home loan, is a loan that helps you cover the cost of buying a new house without a down payment. Taking into account that it is a very big sum, the repayment terms last up to 30 years. Similar to auto loans, the house you end up buying will serve as collateral. That means that failing to make the necessary payments can result in losing your house. There are different types of mortgage loans, and they can have both fixed and adjustable interest rates. 

5. Debt consolidation loans

Debt consolidation loans serve as a way to pay off an already existing debt that has a high-interest rate, usually credit cards. The term consolidating implies that you will be paying off your debt to one lender rather than several. These loans usually offer lower interest rates than the already existing high-interest debt. The repayment terms vary and depend on the type of a lender you work with.

6. Credit-Builder loans

Credit builder loans, unlike other types of loans, are meant for people with low credit. So rather than needing good credit to qualify, here you will “need” a bad credit score to be considered. These are short-term loans and usually offer smaller amounts that can help you build up your credit. So basically, the lender puts the money into your account, and you make fixed monthly payments for a few months. After you repay the whole amount with interest, your credit score will increase.

7. Home equity loans 

A home equity loan, also known as a second mortgage, is a loan you can get if you have equity in your home. This type of loan lets you usually borrow up to 85% of the equity in your home, which you can use for different purposes. You receive the money as a lump sum, and you pay it back monthly for a duration of 5 to 30 years.

Conclusion 

All in all, there are a number of loans to choose from for different purposes. If you think that taking out a loan is the best option for your situation, then don’t hesitate to do so.