Tips to find out the loan type you need

There are so many types of loans in the market from payday advance loans to credit card loans, each designed for a specific purpose. Since all the loans are not similar in nature, choosing the right loan that best fits your need can be quite a difficult task if you don't understand the basics well. Here are a few tips on loans:

Secured loans:

As the term explains for itself these loans are issued against any item/collateral that is in greater value than the actual loan amount applied for. Secured simply means that the lender gets the security and not you. Due to this very reason these loans are available at low interest rates and have a lengthier repayment time. If you are unable to repay the loan amount and have defaulted then the lender has an upper hand to forcibly possess your collateral or even sell it to reclaim their money. These loans are lent to people who have bad credit histories because the collateral safeguards a lender from incurring any kind of losses. Some of the examples for secured Loans are Home Equity Loan, Home Equity Line of Credit, Auto Loan (New and Used) and Home Improvement Loan.

Unsecured loans:

An unsecured loan doesn't require any collateral to be pledged against it. This loan is usually  offered in smaller amounts with higher interest rates and has to be repaid within a shorter time-frame. Unlike the secured loans the unsecured loans are of lower risk to the borrower. Since the borrower isn't pledging anything they stand to lose nothing if the repayment of the borrowed amount is defaulted. These loans are always given out at a cheaper rate to people who have decent credit scores, similarly they are also offered to good credit holders. Some of the best examples of Unsecured Loans are Personal Loans (payday advance loans) and Personal Lines of Credit.

Home Loans:

Home loans are typically offered to buy a home or can also be borrowed for mortgage purposes. These loans work on a longer repayment time module and slightly vary in aspect when compared to personal loans. The possibilities of defaulting the repayment are less because the lender can repossess the home if the amount is not repaid.

Debt consolidation loan:

As the term implies debt consolidation loan helps a borrower repay all his numerous debts by consolidating.  The lender here processes the loan amount directly to the borrower's creditors. These loans have the potential to lower the burden of repaying the debts by spreading it for a longer repayment time period.

Credit card loans:

Credit card loans are personal loans that are similar to payday advance loans. They can be obtained from the credit card company. These loans are offered to card holders who have good credit ratings. Generally the APR's are usually high when compared to other personal loans.

Payday advance loans:

These kinds of loans can normally be obtained from payday loan lenders and other short term installment loan lenders. The criterion here is that the borrower should be a resident of the country aged 18 years and working regularly. This loan is basically for short term purpose, as in within paydays. A borrower needs to repay the loan amount in a shorter time-frame.