If you’ve been researching how to get more money, you’ve learned that a loan is not a loan. There are many kinds for all purposes. Determining which kind of loan you need will help you narrow down which lender you want to choose. Today, we’ll provide a simple overview of what type of loan the average consumer is looking for – a consumer loan.
What Is a Consumer Loan?
Unlike business loans, consumer loans are there to help you on the personal side of life, although not all consumer loans are considered “personal”. More on that coming up.
Furthermore, business loans are associated with higher interest rates, and you usually need a cosigner, or a guarantor. That said, the terms of business loans are usually more brief and hence, easier to understand.
So if you’re not looking to fund a business, and the loan you need will benefit you and maybe your household, what you need is a consumer loan.
Three Major Types of Consumer Loans
There are various loans that fall under the consumer umbrella, but right now, we’ll explain the most common three.
Very few people make enough money buy a house outright; that’s why we get a mortgage. A mortgage is a home loan that allows you to pay off your home month by month. A lot of these loans are paid off over decades, making true, outright ownership of a home a serious long-term commitment.
There are several types of mortgages. The Federal Housing Administration provides mortgages for those with lower incomes. Privately-owned mortgage companies like Fannie Mae are backed by the government, and dole out conventional home loans. The latter is usually chosen by those with better credit who can afford a larger down payment.
Subsidized and unsubsidized federal student loans are used by a high percentage of those furthering their education. Subsidized loans are typically taken out by students with lower incomes, so the amount of interest they have to pay once they graduate won’t be exceedingly high.
Even if you’re starting off from a well-to-do family, you can still get an unsubsidized loan. If the student still relies on their parents (that is, they’re not working full-time and providing everything for themselves) they can get tens of thousands in loans toward their college education from the government.
Of course, federal loans aren’t enough for some people, so they might supplement with private loans.
Personal loans are often taken out thanks to an emergency. In addition, consumers use these to pay down debts and improve their credit score. The types of lenders offering personal loans have a wide range of criteria and terms, so it’s worth checking out LoanReview HQ for facts on various lenders.
Many lenders are aware that personal loans are used in emergencies. They’ll often demand very high interest for fast money, so be cautious.
Other consumer loans include auto loans, home equity loans, and home equity lines of credit. No matter which you need, remember that the terms, from installment frequency to interest and requirements, will differ according to lender. Check out the terms carefully across at least three lenders before committing to a loan.