People need loans for different reasons, and very few loans are one-size-fits-all. Typically, if you tailor your loan to your specific needs, it’s a better option than getting a general loan.
Peer-to-Peer Lending
Image via Flickr by Got Credit
If you need a personal loan and don’t want to go through a bank or credit union, peer-to-peer lending is a less traditional option. If you have proper credit, you typically can get lower rates than a bank for your loan. If your credit score is lower, you usually can still find loans with decent interest rates. It’s easier and faster than going to a bank, and the whole process is typically done online — which is more convenient for many people.
Home Equity Line of Credit
If you want to renovate your home or just free up extra cash, you can take out a loan with your house as collateral. As long as your mortgage isn’t underwater (“underwater” means the house is worth less than you owe on it), you can take out a HELOC. You typically can borrow up to 85 percent of the equity in your home. Before taking out a HELOC, investigate any fees you might have to pay. Some banks charge administration fees, application fees, and closing costs, which might make it cost more than other options.
Auto Loans
Auto loans are used exclusively to buy a car. The easiest way is to have the auto dealer handle the financing, but that’s not the only option. You can often find your own financing and have it ready when you buy the car. You’ll have more control over the bank, the down payment, and the interest rates, making it easier to negotiate the price of the vehicle.
If you’re buying a used car, expect to pay higher interest rates than on a new car. Furthermore, most banks won’t finance a car that is a rebuilt. If you’re buying a rebuild, you will probably need to get a personal loan to finance the vehicle.
Private Student Loans
In most cases, subsidized student loans are the most economical option for attending college. There are government loan limits, and once you reach those, you might wonder how to continue paying for school. The best private student loans typically have a higher interest rate, but lots more flexibility than federally-funded loans so they are advised as a better and more reliable option to use. There are also many tools you can take advantage of online as well (more info here) to help you estimate your student loan payments so you can better prepare yourself with any other bills you may have too.
Small Business and Equipment Loans
If you’re starting a business, you can get a small business loan or an equipment loan. An equipment loan is explicitly used for the equipment necessary to operate your business. The small business loan has more leeway on where you can spend the money to run your business. Small business loans are financed through a bank. You could also consider peer-to-peer loans if you’re thinking about starting a business as well.
It’s easier than ever to apply for a loan if you meet the requirements. Do your research and make sure you find the best option and most suitable loan for your specific needs.
