What kind of loan is best for you?

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Ellie G

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When it comes to loans there are a vast array of financial options open to you. The challenge though is finding the one that best suits your particular needs.

The first thing you need to do is shop around in person and on the Internet. Compare loan rates from different lenders. You want to determine whether a traditional bank or finance company lender you can deal with face to face is best for you or if you are comfortable with a good (low interest) loan from an online lender.

If you're new to loans and lending in general you may be even more confused by the number of loan options that are available. I will explain the most common ones.

For starters your loan will either be secured or unsecured. This means is that you may be required to use some form collateral (personal property that has value to guarantee repayment of the loan).

A secured loan is one that requires collateral likewise an unsecured loan does not. If you can put up some collateral your chances are greater you will be able to secure a lower interest rate.

Other types of loans are mortgage and financing - both are secured loans but in this case the item (the house) serves as the collateral. Mortgage and financing loans are often used when purchasing high value items like homes, automobiles and some electronics.

Interest rates and repayment terms will vary depending on the amount of your down payment as well as the total amount borrowed, and the amount of time that the financing covers. The repayment terms for most loans range from one to five years but in the case of a mortgage loan could be as high as thirty years.

My best advice is to always do your homework and research your loan options throughly before deciding on one and signing on the dotted line. And don't forget to read all that fine print! You will thank yourself in the end by knowing exactly what you are getting yourself in for.