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An Overview Of Your Loan Options

There are many situations when you may need a loan. Purchasing a house usually won’t happen without a home loan. Paying off your debt is made easier through a consolidation loan. Personal loans can be used to help pay for just about anything you need in life. But how do you decide which loan is right for you?

Secured Loan

An auto or home loan is what is referred to as a secured loan. It is called a secured loan because the loan is secured with an asset. Your lender will simply take the car or house back if the loan is not paid off in a timely manner. The asset will then be sold at auction to pay the rest of the money owed. Interest rates are generally lower because the lender has the ability to recoup their money. Government-backed loans such as student loans are also considered secure loans.

Unsecured Loan

Credit cards are considered an unsecured loan. Unsecured loans rely solely on the ability of the borrower to pay back the loan. Interest rates are generally much higher for an unsecured loan. Credit scores generally need to be higher to qualify for an unsecured loan at a low interest rate.

Personal loans are also considered unsecured loans in most cases. Military loans by Pioneer are an example of a personal loan. The average interest rate for a credit card is around 15 percent whereas personal loans can run as high as 18 percent interest.

Consolidation Loan

Consolidation loans help out when you are having trouble repaying your debt. These types of loans roll all your current debts into one monthly payment. The biggest benefit for the borrower is a lower interest rate on their debt payment. Home equity loans are an example of a consolidation loan.

Borrowers with any credit score can take advantage of most types of consolidation loans. Those who are deeply in debt may consolidate through debt negotiation instead. Debt negotiation is when you use a third-party debt relief service to negotiate with your creditors on your behalf.

There are many different types of loans out there. The one you choose depends on your current financial needs. Knowing how each type of loan impacts your credit will be another determining factor in which loan you choose. Remember that all loans should be repaid as agreed with your creditor. The consequences for not doing so may severely impact your credit score.

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