There may be a variety of reasons you could take a loan. The kind of loans you avail of depends on your purpose. You can take an online loan or visit the bank and take one. Most of us have heard of the most common loans there exist. Like personal loans, student loans, home loans, business loans, etc. But a lot of us do not understand the difference between these loans and what purpose they fulfil.
Here are the most common kinds of loans and their features:
- Personal loans
These loans are versatile and can be used for almost anything. While most other loans are specific as to their usage, personal loans have no such limitations. The borrower can utilize the money for practically any purpose. Your loan application can be submitted for either a secured or an unsecured loan, depending on your preferences. Although, it is essential to remember that an unsecured loan does not have leverage. Therefore, the interest rates are higher for this kind of loan.
- Small business loans
There are a multitude of reasons businesses take loans. It is a helpful tool for a business when it wants to expand its company or fill in the gaps between invoices and payments. To buy inventory, equipment, pay salaries to their employees, advertise, clear debts, etc.,
- Car loans
Car loans are secured when the borrower wishes to purchase a car or a vehicle. Cars are generally one of the most prominent expenses one incurs. It is effortless to get a loan if you have a good credit score. If you pay EMI on time and clear all your credit card bills on time, your credit score increases significantly. A score over 750 is considered a good credit score. Considering these are secured loans and the car is considered leverage, the bank will be entitled to take possession of it if you fail to pay your EMIs on time.
- Student loans
These kinds of loans are meant for students and can be repaid a few months after they graduate or when they land a job, whichever occurs first. The interest rates of these loans are much lower compared to other loans as they are available to students, keeping in mind their financial conditions. Students can procure these loans from a loan app online. The credit history of the students is not considered to a great extent. Therefore, these loans are beneficial for them.
There are a multitude of reasons businesses take loans. It is a helpful tool for a business when it wants to expand its company or fill in the gaps between invoices and payments. To buy inventory, equipment, pay salaries to their employees, advertise, clear debts, etc., these loans can be useful for a company. A company’s credit score is one of the factors that are considered when it comes to lending money to the business. The higher the credit score, the better it is for the company as it becomes easier to secure a loan to expand. Before taking a loan, it is essential to calculate the time, interest rates and the number of EMIs required to clear the loan amount. A loan calculator app is a handy tool to do so.