Know about the different types of loans before opting for one

Thinking of taking a loan but not sure which is the best one for you? This is a common problem that most people who have just started earning have. Since they have just taken up a job and become financially independent, managing their finances is a bit difficult for them. As a result, they end up spending their earnings even before they have completed a fortnight. Struggling to manage for the remaining ten to fifteen days is something quite common for people. The situation is akin to living in a hostel, except that you cannot ask your parents for money now. Even if you could borrow from friends, you eventually need to pay them back.

Financial companies and banks come in handy at these times as they can help you during the cash crunch by providing you with the required amount of money. Unfortunately for youngsters, there are several types of loans that can confuse them completely. If you too are one of the several people who require money but cannot differentiate between the different types of loans available, here is a complete guide to help you choose from the options available…

  • Instant personal loan

According to one of the best online loan app, these loans are disbursed within a few hours of applying, especially if you qualify for the same. Personal loans can be used for any purpose, from buying essential items for your home to sponsoring the family trip, and extending your home or refurbishing it. Personal loans can be either unsecured or secured.

As the name suggests there is no collateral involved in the unsecured personal loan. Thus, if you default on it, you do not lose any asset. These loans are usually used for a home extension, painting, wedding expenses, or to pay off any other high-interest loans you have, such as credit cards. However, opt for an unsecured personal loan only if the rate of interest on it is less than what you are paying on credit cards.

A secured personal loan, on the other hand, has collateral that serves as a guarantee in case you default. As collateral is involved, the rate of interest on these loans is less than unsecured personal loans. Thus, you can end up saving money on interest if you take these loans. However, you need to ensure that you can pay back the cash loan you have taken, else, you could lose the asset posted as the collateral.

  • Payday loans

Also known as the salary advance loan, these are short-term loans that are provided to individuals to tide over the money shortage they face till they get their next salary. Usually, the loans are available at a high rate of interest and the terms usually vary depending on the lender. You are required to deposit post-dated checks to the lender so that they can receive the amount when you have a balance in your bank account. Alternately, the lender could be authorized to directly withdraw the borrowed amount and interest from your bank account. Though they are not ideal due to the high-interest rates, they are one of the best ways to get an urgent loan especially when you have run out of options.

  • Pawnshop loans

Though not considered ideal, if you need an urgent cash loan, then you can easily opt for this loan. Any item that is worth something can be used as collateral at the pawnshop to borrow money. This type of loan is usually preferred by people who fail to obtain credit anywhere else. The interest rate and terms of the loan can vary depending on the lender at the pawnshop. If you can pay for the loan and interest on time, you can get your item back. However, the chances of this happening are typically low. Hence, this type of loan is generally not advised.

  • Gold loans

As the name specifies, you get a credit against any gold you have. This is common in places where most families invest their savings in gold. You can avail cash against the gold items you have for a specified term. This is ideal if you wish to fund your start-up or have some other financial needs to attend to. If you fail to repay the amount, the gold items are auctioned off to the highest bidder.

  • Title loans

This is a type of secured loan which uses your car’s title to borrow money. You can borrow an amount up to 25-50% of your car’s current worth and need to pay it back within 15-30 days. These are short term loans to provide you with an instant cash influx. However, if you fail to pay back the amount, your vehicle can be repossessed.

  • Home equity loans

In this case, you keep your home as collateral to borrow the money you need. The lender allows you a credit depending on how much equity you have in your home. Usually, you are not allowed to get a loan for more than 85% of your home equity. These are generally preferred if you cannot afford the high-interest rates charged by unsecured personal loans. You can use this loan to pay for your medical expenses, home renovations, or any other requirement. Unfortunately, if you default on these loans, you might end up on the street, without your home. The lender has the right to foreclose on your property if you miss your payments.

Getting a loan is easy now!

Since most procedures have become online, getting a loan has become extremely easy. Several financial companies have applications that provide you with instant loans without involving any long hours and lengthy paperwork. You can simply fill the forms online and submit documents, once the verification is done, you are guaranteed an instant cash loan.

If you are looking for one of the best instant loan app in India, is an excellent option. With instant mini loan available easily and online, you do not have to worry about anything.