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Loans get a very bad name, but that’s mainly due to specific types of loan that end up putting people in debt. This doesn’t mean there aren’t loans out there that are beneficial, you just need to know how to use them and what to look out for.
This is one example of many that showcase how little the general public knows about loans. As a result, I’ve made it my mission to ensure you know as much as possible, which can help you decide if a loan is right for you.
Types Of Loans
There are plenty of types of loans out there, and these are the most common:
- Short-term/payday loans: money is borrowed instantly and paid back within the space of a week or two.
- Personal loans: money is borrowed for an extended period and paid back over time.
- Installment loans: a type of personal loan that’s paid back in regular installments.
- Mortgage loan: a loan specifically for buying a house
- Debt consolidation loan: a type of personal loan specifically used to consolidate multiple debt.
There are various ways you can apply for loans, and this is dependent on the loan you’re after. For big loans like mortgages and personal loans, it’s always best to apply through your bank. They tend to have the most money to give, and they’re safe.
When you apply, you must be wary of a few things. First of all, make absolutely sure you get all the details correct when you fill in the form. If you lie about anything or make a mistake, then you could get done for fraud. This means you have to hire a bank fraud attorney to plead your case, and it’s just a load of unwanted effort. So, first things first; double and triple check your application to make sure it’s accurate.
The success of your application can depend on these things:
- Your credit history
- The amount you’re asking for
- The amount of money you currently earn
Paying For Your Loan
Naturally, people don’t lend you money just for the sake of being nice. Lenders get paid for doing so, which comes in the form of interest. Every loan has an interest rate, and it can be fixed or variable. Fixed ones mean the rate never changes, while a variable one fluctuates. I’ll leave a video below to help show the differences between the two.
With a loan, you pay what you borrowed, plus interest on top of it. With the majority of loans, if you pay everything back on time, then you’ll be fine. Problems occur when you don’t pay it on time, which usually means you get additional charges and the interest can increase. That’s how so many people end up in debt because they got a loan. Payday loans are the worst for this, as they have extortionate interest rates that activate after a period of time.
To round things off, yes, loans are generally helpful when used correctly. The golden rule is this – check if you definitely need the loan and if you can afford it. If you can’t afford to pay back your loan, don’t apply for one in the first place. If you can, then it can help you do things like buying a house or a new car.
Check out these other great resources to help you with your personal budgeting –
Yes, I include affiliate links in all my blogs. I get paid a little each time you click and buy from the included links, but I only recommend products that I use myself. Thanks for supporting our blog and our dream of changing the financial futures of all families and individuals! ~ Lydia Y-S.