Loans are commonplace in our society, and people use them for all sorts of things. There are several different types of loans and each loan can be used for a specific purpose. If you’re looking to make a big purchase or need money for something like an investment, business start-up, or school tuition, you might need to know what kind of loan you’re looking for and what it can do for you.
Being smart about loans ensures you don’t go into debt without being prepared. That’s why this article will cover the different types of loans, what you can use them for, and how you can pay them back on time by staying informed on the amount you’ve borrowed and the interest rates you’re going to accrue.
Auto loans cover automobile purchases. These are quite common loans; nearly everyone who buys a new car has to get an auto loan. Auto loans typically have a duration of three to five years, with extensions available as well as refinancing if necessary. Just like standard loans, these loans require monthly payments. Before you take out an auto loan, do some research on the interest rates. Car loans typically range from three to ten percent APR with the most common range being in the four through six percent range.
If you’re going to take out an auto loan it’s extremely important that you calculate monthly payments ahead of time with interest incorporated into the payments. You can use a loan calculator to do this. It is always better to be prepared for payments than to go into a loan not knowing how much you’ll need to pay back.
If you need a little extra money to cover tuition, you can take out a student loan. Student loans are usually not paid back until you are no longer attending college. This should apply for most lenders and if you are unsure whether you can wait until after school to start paying it back, you should ask someone at the lending agency.
Some student loans begin accruing interest immediately upon signing, while others will wait to accrue interest until payments have begun. It’s important to note the difference when applying for student loans, and you should always look for an interest rate that does not start until you begin payments. This ensures interest does not continue to stack up for as long as you’re in school.
Similar to credit cards, personal loans can be used for pretty much anything. If you can avoid taking out a personal loan do so. However, they are extremely useful in a pinch. Personal loans are typically not used for houses, cars or businesses but they can be used for other purchases essential to your personal life.
Always read your loan very carefully before signing. Be mindful of your interest rate and make sure you don’t miss any payments. Loans are great resources, and paying them back on time will help increase your line of credit and purchasing power in the future.