The average income of a U.S. household is $61,372. While this is enough to live comfortably on, it may not be enough to buy a big-ticket item, such as a house. Also, it’s probably not enough to start a business and pay for overheads either.
When people don’t have enough money saved up to pursue their dreams, then they turn to loans. If you’re wondering “what type of loans are there,” then read on for a basic guide.
What Type of Loans Are There?
Although there are many different types of loans available, we’ll talk about four of the main ones: student, payday, auto, and small business loans.
Millions of Americans are in the process of paying back student loans. Even with your savings, tuition can be pretty steep.
Student loans are more beneficial than regular bank loans since they have low fixed interest rates. You also don’t have to repay them until a certain amount of time after you’ve graduated from university.
There are two types of student loans: subsidized and unsubsidized. Subsidized loans are for people with great financial need since the government helps pay the interest while you’re in school.
These loans usually have high interest rates, but you’ll get the money you need quickly. Also, you usually don’t need good credit to get a payday loan, so it’s a good choice if you can’t qualify for other types of loans.
You have to pay back the amount with your next paycheck or you’ll have to pay a fee to extend the repayment period. You may have to put collateral down at the beginning of the loan process.
If you’d like to know more about payday loans, Bonsai Finance has more information.
This type of loan is specifically for buying a vehicle. It’s up to you whether you want a new or used one with the loan.
These loans span over longer terms, usually around 60 months. However, it’s becoming more common to see auto loans that span up to 84 months.
Your car will depreciate over time. If you aren’t getting a new car, it’s better to get a shorter loan repayment period.
Small Business Loans
If you’ve had a small business for a while, you may qualify for a small business loan, but you’ll need a decent credit score. Online lenders will usually have a lower credit score requirement than traditional banks.
If your business has less than 500 employees and you need some financing to grow your company, consider applying for a small business loan. You can borrow anywhere from thousands of dollars to over $1 million for some loans if you qualify.
Secure Funding for Your Needs
Now you know the answer to the question “what type of loans are there.” With this knowledge, you can make an informed decision when you apply for some funding.
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