What Type of Loan is Right for Your Needs?

At one point or another, most people will find themselves in need of more money than they currently have in their bank account. No matter how good you are at budgeting and saving your money, there are simply some times when you’ll likely need financial help of some form. Most people find themselves in this situation when they’re making a very large purchase, such as a home or a new car. You may also need outside funding when you’re paying for university for yourself or for a dependent, when you’re moving cities, or when you have unexpected medical costs.

In all of these situations, people typically take out loans. However, there are a wide variety of loan types that you could take out — so how do you decide which is right for your financial situation? Take a look at the some of the most common loan types to help you figure out which one fits your circumstances.

Student loans

As the name implies, student loans are used to fund educational expenses. Student loans can be taken out by college students themselves or by family members in order to pay for the college student. Loans can be either federal or private, although federally funded student loans typically have lower interest rates.

Student loans don’t have to be paid back until after the student has graduated from college. Many student loans have a grace period, to allow the student to find a job and establish themselves before they have to start paying their loans back. Often, this grace period is six months long, although the specific grace period depends on the specific loan. Many student loans also do not begin accruing interest until the student has graduated, making it more feasible to pay off the loans in a timely manner.

Mortgages

Mortgages are a type of loan specific to real estate, and used to allow the borrower to purchase a new home. Most people choose to make a downpayment on their home, and then acquire a mortgage to fund the remainder of the cost of the home. Mortgages are very long-term loans. Borrowers often take mortgages out for 30 years or even longer, which as a result means that mortgages have a low interest rate in comparison to other loan types. Like other loan types, mortgages can be paid off earlier, which saves the borrower on interest that would have been accrued otherwise.

Keep in mind that your home is linked directly to your home, which means that the lender likely has permission to seize the property if you fail to pay your mortgage payments.

Car loans

Car loans are similar to mortgages, in that they’re used to fund a specific large purchase, in this case a new vehicle. Car loans are also linked directly to your vehicle — just like mortgages — so once again your vehicle may be seized by the lender if you don’t make your payments.

Personal loans

Unlike the other loan types listed above, personal loans aren’t earmarked for specific purposes. Instead, they can be used for just about anything, such as medical bills, moving costs, or even vacation. This makes personal loans the most versatile of the loan types, and can be used to cover your financial needs that don’t fit into any other single category. To learn more about personal loans, and how you can apply for one, click here, and you’ll be well on your way to getting the financial support that you need.