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What Types of Loans Are There?

Apr 2, 2008
Today, almost everyone has some form of loan out with a bank, some other financial institution, a private lender, etc. Yet, what are the most common categories that people have loans and how are these loans used? There are actually four basic categories of loans, which include auto, home, education, and personal or small business. Each of these categories can be subdivided based upon the application of various circumstances. It should suffice for the purposes of this article to relate basic information about each of these four primary categories for those who may not know all that much about the topic.

The first category of loans we shall discuss is auto loans. The purpose of an auto loan is not a mystery. Today, having a reliable car or vehicle is a necessity for most people. Since many people simply cannot afford to buy even a decent used car outright, an auto loan is required. Most automobile dealerships offer financing for car loans through participating lenders and you will need to meet certain requirements in order to qualify for a loan. Of course, these requirements will vary considerably with the availability of loan options for those who have poor credit ratings.

Education loans include those for students who have attended college right out of high school as well as adults who have taken classes to further the career educational levels. Education crucial to one's to financial success; in fact, it is not surprising to note the numbers of banks, financial institutions, and government financial aid programs are constantly growing and changing to compensate for the rising costs. The goal is to give access to anyone who desires to improve their level of education, and by extension, their employment circumstances.

For anyone who has the dream of owning a home, a home loan or mortgage loan is a means of fulfilling that dream. Like other types of loans, you will have to fit certain qualifications or meet specific requirements that are established by the lender to receive a loan for a house. Since this is such a long-term expense, you will need to pay close attention to what sort expenses you will need, how much your payment will be, etc. Now, if you already have a home, but you need to get another loan, you can actually obtain a mortgage loan on your house. In either case, you need to take the time to research all of the home loan options out there to be sure you will get a fair deal from a lender.

The final category of loans includes those that are obtained from banks or credit unions on a personal basis or for small business purposes. These two purposes often blend together; you may want a personal loan to pay off overhead expenses in a new job venture or you may want to develop a new business from the ground up and need start-up capital. A personal loan may simply be a loan to pay down your debts and can serve as a form of debt consolidation.

This overview provides at least a slightly clearer picture of the loan realm. Yet, if you investigate, you will soon find that there are many nuances and other subgroups of loan types that add to the complexity of the subject.
About the Author
Peter Kenny is a writer for The Thrifty Scot, please visit us at Unsecured Loans and Mortgage
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