Different Types of Loans

What Are Loans
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When searching for loans, it’s easy to feel overwhelmed and frustrated with the numerous options to choose from. Depending on the loan type, the funding amount, repayment length, and interest can all differ.

Before searching for lenders, it’s important to know how much emergency funding you need, what you can afford to pay each month, and if you would like to use an asset to secure the loan.

The following types of loans are all popular loan options to consider when in the midst of a financial dilemma. Learn about the various details in order to make the best financial decision for your situation.

Pawn Shop Loans

When in need of fast funds that do not exceed a few hundred dollars, you could consider a pawn shop loan. In order to acquire funding with this type of loan, you will need to surrender an asset as collateral. This can include:

  • Jewelry
  • A car
  • Valuable equipment
  • Instruments

The loan amount is contingent on the items value, but the average loan amount is $150. The loan typically needs to be repaid within 30 days or the item will be forfeited. High interest rates are attached due to the short length of the loan.

Payday Loans

Payday loans are exceptionally popular due to the quick inquiry process and availability for individuals of all financial backgrounds. This type of funding is unsecure, meaning an asset is not required.

Payday loans require the borrower to provide bank information or a check. Repayment is generally due within 2 weeks, on the borrower’s payday–hence the name. Loan amounts usually reach up to one thousand dollars.

While convenient, the extremely short repayment period forces the borrower to repay the full loan amount and fees on time on time. Make sure you budget accordingly so that you can repay on time.

Auto Title Loans

Auto title loans are a type of secured loan. They use the borrower’s car title as collateral, although the borrower can keep driving their car. The process is quick and easy, although the auto title loan amount depends on the equity of the car.

The interest rates can be high, so make sure to compare lenders. One of the benefits of a title loan is that borrowers could receive years to repay their loan, unlike payday loans or pawnshop loans.

There are many different types of loans available for people to inquire about. It is important to know how much you need, how much you can pay monthly, and if you would like to use an asset before making a financial decision.

 

About the Author

Tobias Simmons is a personal finance blogger born in Ontario and based in Las Vegas, Nevada. He's no Doctor of Science or financial expert but is a self-taught student giving advice for the average peer.