When it comes to loans, it is worth mentioning that there are various types and knowing which one suits your needs best is mandatory, yet at the same time it can be rather daunting and challenging. From mortgage loans, to student loans, secured or unsecured ones, auto loans – the list can be quite extensive. To benefit from the best results, it is advisable to resort to some professional help from experts in the field. For instance, Lending Expert deal with all types of loans, mortgages and types of personal finance and such specialists can definitely provide you a clearer idea upon which type of loan is right for you. Until then, check this useful information on several most important loans below in this article.
The open-ended type of loan
This type of loan provides you with revolving credit. This means that you have a specific amount that you can use, also known as credit limit. Know that the more money you spend using this fixed-limit credit card, the more the overall sum available goes down. Once you have finished paying off that sum, you are allowed to reuse the credit card again. One great advantage of this kind of loan is that it is flexible and offers you the possibility to access it whenever you need.
The closed-ended type of loan
Some types of loans can be included in this category and those are mortgages, auto and student loans. Compared to the open-ended ones, this kind of loan has a pre-established payoff schedule and a set amount. The moment you pay off your debt, you have nothing to do with the loan anymore, which means that if you need to borrow money some other time, you will have to follow the same steps in the application process once again. This one is a great choice if you know exactly how much money you need.
The fixed-rate type of loan
The benefit of this kind of loan is that the rate is fixed and predictable for its entire duration, which allows you to calculate your monthly budget and keep track of it considering your fixed monthly payments. For example, you agree to have a 6% rate for a 72-month term. In this case, the rate will remain unchanged for all 6 years while you have that loan.
The variable-rate type of loan
Compared to the previous kind mentioned above, the variable-rate ones include interest rates, which can be changed according to the market. This means that for a period of 6 years of loan, you can agree to have a 6% rate during the first two years, and one that may vary between 3% and 14% during the following years. In case the market rate gets lower, you can take advantage of a lower interest rate as well. Yet the other way round is also valid, so in case the rate goes up, your payments will automatically become higher.
All things considered, these are some of the most common types of loans available on the market. Make sure you opt for the one that suits your needs best.