Loans can be a saving grace for people who are experiencing financial problems. In other cases, loans can provide a means to achieve a lifelong dream. If you are thinking of getting a loan from Salt Lake City banks or lenders, you should know what type of loan to get. Since there are various types of loans, such as title loans and personal loans, here is what you need to know before you take one out:
1. Personal Loan
There are two types of personal loans: unsecured and secured. In an unsecured personal loan, you are charged a higher percentage rate per year, but you don’t have to lock in collateral. On the other hand, a secured loan will require you to back your loan with collateral (e.g. car, house, etc.) but will charge you lower yearly rates.
Personal loans can either be fixed-rate or variable-rate, too, which is another factor that you need to consider. Fixed-rate loans will require you to pay the same rate for the entire life of the loan. For variable-rate loans, however, interest rates may fluctuate depending on the rate of your loan.
Pros:
- Various uses
- Collateral is not always required
- Good credit is not needed
- Longer loan repayment
Cons:
- Rates may be higher
- May require an origination fee
- Pre-payment penalties
- Risk for scam
2. Student Loans
If students cannot afford the exorbitant cost of higher education, they can take out either a federal student loan or a private student loan. Federal student loans are government loans that typically have lower interest rates and can be more borrow-friendly. Private student loans are offered by private organizations, which can be more expensive than federal loans.
Pros:
- Student assistance
- Not due until after graduation
- Credit checks are not required
- No pre-payment fees
- Repayment helps build credit
Cons:
- Can take decades to pay off
- May put off other goals
- Failure to repay can bring down your credit score
- Can be very expensive
3. Mortgage Loan
Homebuyers take out mortgage loans to help them pay for their new house if they can’t afford to pay in full. Depending on your income and cash available for the downpayment, interest rates for mortgage loans may vary.
Pros:
- Helps you afford a house
- Can be flexible
- Lower interest rates
Cons:
- The risk for foreclosure if you can’t repay
- Requires good credit
- Longer loan life has higher interest
4. Small Business Loan
If you’ve always dreamed of having your own business, you can take out a small business loan (SBA) to help you start your venture. There are lots of SBA loans available, so make sure you check with different banks or lenders to find one that will fit your needs best.
Pros:
- Helps you finance a business
- Capped interest rates
- Flexible loan amounts
- Broad eligibility requirements
Cons:
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- May require downpayment
- Collateral may be needed
- Risk of liability if the business fails
- Longer approval process
- Requires good credit
These are just some of the most common loan types that people get to solve their problems or to buy something that they cannot afford upfront. If you want to know if you qualify for a loan, talk to a reputable lender near you.