The types of loans you can take to cover your needs
The types of loans offered by direct lenders differ, first of all, according to the destination of the borrowed money, as follows:
1. Consumer Loans
Consumer loans are provided for amounts obtained for various personal expenses, which do not have to be justified to the lending company. There are three types of consumer loans:
- Payday loans – loans that are paid on the next paycheck. The maximum term of these loans is 30 days. You may get up to $500 payday loans.
- Installment loans – loans that you don’t pay all at once but in small monthly installments. Usually, the maximum term of payment is up to 36 months. You might get a maximum amount of $5,000.
- Personal loans – cash advances you get to cover your planned expenses. You also pay them in small monthly installments, but the maximum amount can reach $35,000. Also, the maximum term is 60 months.
2. Loans for Real Estate Investments
These are the mortgages for purchasing or constructing a home or loans for home renovation. In the first case, the borrowed amounts are automatically transferred to the seller of the house, while for the renovation credits or for the construction of the houses, the beneficiary must prove the expenses to the direct lenders.
3. Credit Cards Loans
These kinds of loans represent a special type of loan, which is not usually included in the credit category. This is because card issuers and lenders recommend that this loan not be used as a regular loan but only as a reserve of money to cover a short-term lack of liquidity or take advantage of certain discounts, bonuses, or special services.
However, more and more lenders are promoting credit cards with interest-free installments as shopping cards, which can be used for purchases to increase values, which can be repaid in more and more installments. A credit card is of two types: credit card and overdraft on a debit card, usually a salary card.
The main differences between these types of loans can be found in the guarantees required by the lenders, the loan repayment periods, the necessary contracts, the kind of interest, the currency in which it is obtained.
Thus, if in the case of personal needs loans and credit card loans, there is no need for guarantees other than proof of personal income. In some cases, one or more collateral individuals, loans for the purchase of goods (household appliances, cars), or housing are guaranteed even with the goods that are the subject of the loan.
This means that if the beneficiary of a mortgage or a car loan does not repay his installments on time, there is a risk that the lender will decide to sell the mortgaged car or house in his favor to recover the debt.
Important to mention is that for the purchase of durable goods or a car, except for real estate, you can use both loans specifically for these types of purchases and loans for personal needs, without guarantees and justification of destination. The difference is that, in general, secured loans are cheaper than unsecured loans.