Debt is part of everyday life for many people in the twenty-first century, and it can be an amazing lifeline when we simply don’t have the spare cash to make an essential purchase or would prefer to pay for items bought over a longer period of time to make budgeting easier. However, there’s more to borrowing money than simply grabbing the first opportunity you come across.

To get the best deal possible it’s vital to choose the right kind of loan. There are lots of different types of loans around, and most intended for a certain purpose. The purpose of each is what defines the amount you can borrow and how much time you can take to pay it back. Let’s take a brief look at the most popular kinds of loans out there.

The most common types of loans

Personal loans

These usually run for up to five years and are often taken out to pay for things like a wedding, a car, or home improvements. The best deals are reserved for applicants with a good credit score and offered on an unsecured basis. Higher risk applicants may need to take a secured loan, which means using something of value as a kind of deposit. This is usually a property, and as failing to make the loan repayments could mean forfeiting your home this type of loan is something to be approached with great caution.

Car finance loans

As you’d expect these are intended solely to help you buy a vehicle, and these days many car sales businesses offer various finance deals to attract customers.

Payday loans

So-called because their original purpose was to provide an emergency cash injection to tide someone over between paydays if they faced an emergency such as a vehicle breakdown, or a broken boiler. These days more people are tempted to use them as a bridging loan between pay packets or benefit payments, which can be a financial nightmare considering the interest rates can be a few thousand percents!

Consolidation loans

Every month thousands of ordinary people juggle regular, ever-increasing payments for things like rent or mortgage, council tax, water and heating utilities, phone, net, and entertainment packages, food, and transportation costs, on static salaries.

Add in any payments owing on debts, which can typically include car finance, personal loans as well as credit and store cards, and seasonal expenses like a family holiday, school uniforms and Christmas and it’s easy to see why making ends meet can be a serious challenge. This is where a debt consolidation loan can be a lifesaver.

The Everyday consolidation loan works by providing a sum of cash the borrower uses to pay off high-interest credit cards, catalog debt, and all other outstanding debts, leaving you with just one convenient monthly payment to make. This is a great way to avoid late payment penalties and damage to your credit rating.

Taking the time to choose the best kind of loan will pay dividends in the long run, so it’s always worth the effort.

 

Published by Peter Garlow