6 Types of Loan in the USA
From personal loans to mortgages, there are many types of loan in the USA that you can take advantage of if you have enough cash to pay it back. If you need money, then it’s important to know what these different loans are so you can choose the one that best fits your needs and circumstances. Here are six of the most common types of loan in the USA.
1) Federal Student Loans
Federal student loans are available to students who demonstrate financial need and qualify for aid under Title IV of The Higher Education Act. Student loans can be used to pay tuition, fees, books, supplies and equipment. There are two types: subsidized and unsubsidized loans. If a federal student loan is subsidized, then it has an interest rate that will not increase until after your grace period ends (usually six months after graduation). An unsubsidized loan has a fixed interest rate from day one.
2) Private Student Loans
If you’re a student looking for some extra help financing your college education, a private student loan could be just what you need. With interest rates as low as 4%, a fixed-term from five to 15 years, and no origination fees, these loans can offer plenty of benefits to students. The downside?
3) Home Equity Loans
Home equity loans are a type of loan that allows you to borrow money against your home’s value. That is, they allow you to borrow money based on what your home is worth rather than how much it currently costs to buy your home. This type of loan usually has lower interest rates and higher limits than a traditional mortgage. These loans are often used for large expenses like paying for college or buying a new car, but can also be used for other things such as repairs or renovations.
4) Personal Loans
Personal loans can come from many sources, including traditional financial institutions. These loans may help you get out of debt, buy a new car or make home improvements. Depending on your credit history and other factors, you might be able to borrow up to $40,000 for a personal loan. Personal loans have fixed rates and payment amounts so you can budget accordingly. You’ll likely need a steady income to qualify for these types of loans.
5) Credit Cards
Credit cards are a type of short-term loan that can give you access to quick cash when you need it. With credit cards, you can spend money you don’t currently have on products or services, but will have to pay it back with interest at a later date. Credit cards are convenient and flexible, so they might be an ideal choice for smaller expenses. If you use them wisely, they can also serve as a way to build your credit history.
6) Peer-to-Peer (P2P) Lending
Peer-to-peer lending means you’re borrowing money from individuals, or peers, and not a bank. Lending Club is one of these peer-to-peer sites that connects investors with borrowers. You can think of it as an eBay for your bank account.
Payday loans can help you get cash fast, but they come with high interest rates and fees. Only use these short-term loans when you are absolutely desperate for money and have exhausted all other options. If possible, try to avoid payday loans entirely by using a credit card or talking to your bank about getting a small loan.