The truth is, not everyone can manage to take care of their financial responsibilities right away. That is why individuals take out loans from lending companies like ProfiCredit.

However, before taking out a loan, individuals need to understand the different types of loans. Doing so will help them pick the right one tailored to meet their needs.

Below is a comprehensive guide on the different types of loans.

Personal Loans

As the name suggests, personal online loans are meant for individual financial needs (this excludes large purchases.) The main advantage of personal online loans is that they can be obtained online. Nowadays, most online banking platforms offer consumer credit.  

Since they can be accessed online, they also have a quick approval and disbursement process. Many online banking platforms take approximately 24 hours to approve and disburse their loans.

Usually, personal online loans are unsecured, meaning the borrower doesn’t have to provide collateral. Moreover, they usually have low-interest rates compared to other types of loans.

Another benefit of consumer credit is that they have flexible loan repayment periods. Nowadays, most personal loan lending platforms allow individuals to choose their preferred repayment period from available options. It could be 14 days, a month, two months, etc. However, remember that the longer one takes to repay the loan, the higher the interest rate will be.

Auto Loans

Also known as a car loan, this facility is meant to help people purchase cars. So, the lender gives the borrower a loan to buy a car. Then, the lender holds the logbook to the vehicle until the individual fully repays the loan.

Like a mortgage loan, an auto loan borrower must make a down payment for the car of their choice before applying for a loan.

Most car loan lenders require borrowers to make a down payment of at least 10% of their preferred car’s purchase price. Although, some lenders offer no-down-payment auto loans. However, these loans may have high-interest rates and stricter loan repayment terms.

Mortgage Loans

A mortgage loan is a type of loan used to purchase a home. Usually, the lender gives the borrower a loan to buy a house of their choice; then, they repay the loan in installments over a specific period. The house serves as collateral, so when the borrower defaults on loan repayments, the lender repossesses the house.

Mortgages have a set of requirements for borrowers before the lender gives them the loan. For starters, the individual has to make a down payment on the house before taking out a mortgage loan. Most mortgage lenders require their borrowers to make up to a 20% down payment on their preferred homes.

Another major requirement is a good credit history, although individuals with bad credit history can still get mortgages. However, they will have to go the extra mile by, for instance, making a larger down payment to secure the loan.

The overall cost of a mortgage (that is, how much an individual will repay the lender) depends on several factors. Among them include the loan repayment period, the lender charges, and the interest rates, to mention a few.

Student Loans

Individuals borrow this type of loan to support themselves as they go through college. Usually, borrowers use the money to pay their college tuition fees, pay for accommodation, purchase their school and personal supplies, and so on.

Individuals can obtain student loans from the government or private lending institutions. The student loan approval process is typically long, but it varies from country to country.

Debt Consolidation Loan

A debt consolidation loan is used to pay other existing loans. So, an individual applies for a loan resulting in the amount they already owe. If the lender approves, they use the funds to clear their existing debts and pay the debt consolidation loan over time.

The good thing about this type of loan is that it has a fixed interest rate. So, borrowers can easily budget on how to repay it. However, people need to be careful since a debt consolidation loan gives one a false sense of security.

Since an individual has already cleared their existing debts using this loan, they may be tempted to take more loans which isn’t the right financial thing to do.

Conclusion

These are just a few of the many types of loans available today. Again, by understanding the various kinds of loans lenders offer, one can make a more informed decision on which type of loan suits their financial needs.