When it comes to borrowing funds for a variety of purposes, there are many options available. Some require collateral, such as a home equity loan, while others do not, like personal loans and credit cards. Still, there are other kinds of loans that require special considerations and can have a wide range of uses, such as commercial loans.
Personal loans offer funding for a variety of needs, including home improvements, debt consolidation and more. Borrowers usually apply for these loans online or through a local lender. Most are unsecured, meaning the lender does not hold any form of collateral against the borrower in case he or she defaults on the loan. This also means that the lender is more willing to lend to borrowers with less-than-perfect credit.
Student loans help aspiring undergraduates and postgraduates pay for the cost of higher education, such as tuition, room and board, books, supplies and more. Borrowers typically apply for these types of federal loans through their school or a private lender. Some student borrowers can benefit from income-driven repayment plans, which reduce the amount of money a borrower owes each month based on his or her financial circumstances. The Department of Education provides a simple and easy-to-use website for enrolling in an income-driven repayment plan.
Auto loans provide consumers with funding to purchase new and used vehicles over time, and rates vary based on the vehicle type and the length of the loan term. Most auto loans are secured, which means that the lender can repossess a vehicle if a borrower fails to make payments.
There are several different types of government-backed loans types of loans, including FHA, VA and USDA loans, which have a few unique eligibility criteria but offer more flexibility than standard mortgages. In addition, there are jumbo mortgages, which have wider qualification standards than conforming mortgages and can offer borrowers more financing options.
A co-signer or co-borrower promises to repay the loan if the primary borrower fails to do so, and the missed payments will affect the credit scores of both people. Generally, this is a risky proposition and not recommended, but it can be necessary for some borrowers to obtain a loan with a favorable interest rate.