The two general types of loans are often known as "secured" and "unsecured" loans. There are many other kinds of ways for borrowing money but all those different financing vehicles can actually be classified into one of these two classes. When you start looking into personal financing options you'll quickly learn that there are different ways to borrow cash for all sorts of things that you need money for.
Unsecured loans are good for small purchases which you can pay off quickly. Even store credit cards are good to use in some cases because the credit limits are low and the introductory interest rates are often decent. Unsecured loans are financing vehicles which are given to you based on your credit score and not based on any single possession you offer up for collateral. Your credit rating is really a measure of your expected ability to pay off what you've owed in the past. If you have always paid your bills on time then you probably have a pretty good credit rating. Most credit cards are usually considered to be an unsecured loan.
Secured loans are a type of loan in which the lending institution has some sort of collateral or payment to hold until you pay off the loan. When you finance a motorcycle or buy a home with a mortgage the bank technically owns what you bought until you've paid off the debt amount plus interest. If you don't pay off your loan then the bank can take your collateral and auction it in an effort to regain some of the money you borrowed.
Secured loans such as mortgages generally have a lower interest rate, which makes paying them off easier over the long run. There is often a longer delay associated with secured loans because they are so much larger than most unsecured loans. Depending on your tax situation you may even be able to lower the income tax that you owe. Common secured loans include home mortgages, new auto loans and many larger home updating financing options.
No matter what type of financing you consider don't forget that you do have to pay the money back and you will be paying interest on the money that is owed. Plan ahead and be sure you can really afford the regular payments before you go forward with your loan. Many costly projects are changed when people finally begin to understand how different loans work.
Unsecured loans are good for small purchases which you can pay off quickly. Even store credit cards are good to use in some cases because the credit limits are low and the introductory interest rates are often decent. Unsecured loans are financing vehicles which are given to you based on your credit score and not based on any single possession you offer up for collateral. Your credit rating is really a measure of your expected ability to pay off what you've owed in the past. If you have always paid your bills on time then you probably have a pretty good credit rating. Most credit cards are usually considered to be an unsecured loan.
Secured loans are a type of loan in which the lending institution has some sort of collateral or payment to hold until you pay off the loan. When you finance a motorcycle or buy a home with a mortgage the bank technically owns what you bought until you've paid off the debt amount plus interest. If you don't pay off your loan then the bank can take your collateral and auction it in an effort to regain some of the money you borrowed.
Secured loans such as mortgages generally have a lower interest rate, which makes paying them off easier over the long run. There is often a longer delay associated with secured loans because they are so much larger than most unsecured loans. Depending on your tax situation you may even be able to lower the income tax that you owe. Common secured loans include home mortgages, new auto loans and many larger home updating financing options.
No matter what type of financing you consider don't forget that you do have to pay the money back and you will be paying interest on the money that is owed. Plan ahead and be sure you can really afford the regular payments before you go forward with your loan. Many costly projects are changed when people finally begin to understand how different loans work.
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