There are many factors to consider to find out what type of loan you need. Making the mistake of thinking that all loans are the same can lead to a poor choice. We will show you the main types of personal finance, their use, and when they may be suitable.
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Types of loans and utilities |
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| Personal loan | Common loan for any purpose |
| Consumer loan | Loans for the purchase of products and services |
| Mortgage loan | Loans for real estate purchases |
| Student loans | Loans to pay for higher education |
| Pre-approved loan | Pre-approved financing for any use |
| Quick loans | Emergency financing |
Personal loan
In theory, it is the most flexible if we refer to the objectives to be financed. A personal loan is a product that offers financing from small to large amounts. It allows us to invest in practically any need, except purchasing a home.
Initially, it is a loan assigned to the financing of intangibles. In other words, unlike consumer loans, it is an appropriate product for financing services, specific cash flow needs, unforeseen events, etc.
Among loans, it is one of the most expensive and has low bonuses for linkage to other products. Most of them are offered with variable interest rates.
Consumer loan
Supposedly, it refers to a product aimed at acquiring consumer goods. As mentioned above, its actual application is often confused with personal loans. They are usually appropriate for purchases such as household appliances, vehicles, or small purchases at Christmas.
They are not used to finance large amounts and usually have a lower value than personal loans. Besides being more suitable for the bonuses for linkage, obtaining proposals of variable or fixed interest, with a certain facility in both cases, is possible.
Mortgage loan
This type of loan is aimed at the purchase of a home. It is the financing product with the greatest impact on the family economy. That is due to the amounts to be financed and the long settlement periods.
They offer different interest application alternatives, fixed and mixed variables. They are suitable for bonuses in the form of deduction of the differentials according to the linkage when contracting other financial products. That would be the most common and usual way of financing the purchase of a home.
Student loans
It is a product that has managed to carve out a niche within the wide range of loans by making great strides over the last century. It is probably one of the best-known and most widespread financing tools in the United States.
These loans are designed to finance higher education, with room for issues such as master’s or postgraduate, among other alternatives. It is a wide offer, where it is possible to finance only the tuition or all the expenses from the studies, including lodging.
This loan model is more economical than other options, where a large part of the offer is based on fixed interest rates. They do not usually present great benefits or additional bonuses since the initial proposals are generally very tight.
Pre-approved loan
This loan model has been on the rise in recent years. It is directly linked to the client’s relationship with the entity. It is a type of loan that can take different forms:
- Line of credit over a specific time.
- The previously accepted amount is available for single use.
- Payroll advance.
Depending on the model selected, the costs and interest vary, but they are normally cheaper than personal or consumer loans, even though they require a high degree of loyalty.
Quick loans
They have entered the market to compete with personal loans, which alternatives like pre-approved loans have overtaken. Specialized companies usually manage quick loans and not banks. In them, we find a product to finance small amounts (from $50) and short terms of liquidation (no more than a month).
It is a comparatively expensive product. It bases its capacity on fast approval and short terms. That is where it is most competitive. It is a market response to the great demand for small financing to solve specific problems in the family economy.