Today's financial market offers many different
types of loans to consumers.They are usually used to purchase items that require large
amounts of cash, such as a house or a car.The following are some commonly used consumer loans:
Personal Installment Loan
The uses for this type of loan vary.Proceeds from a personal loan
can be used for anything from debt consolidation to “the vacation
of a lifetime.”Payments
are made in weekly or monthly installments, and the loan is generally
repaid within 12 to 36 months or longer.A lender may or may not require collateral, depending
on the borrower's financial situation and intended use of the loan.Finance charges vary depending on the lender, and the amount
and term of the loan.
There are personal loans that have a very short
term.This type of
loan is usually repaid within 30 to 90 days in a single payment.However, because of the short
repayment term, these loans are not popular with most lending institutions.Furthermore, these loans almost always require some type
of collateral.The primary sources for personal
loans are commercial banks, finance companies, credit unions, and
savings and loans.
Auto Loans
Theseloans are specially tailored for
the purchase of automobiles.Most lenders require a down payment of 5% to 20% of the purchase
price.No additional
collateral is needed since the car secures the loan in cases of
default.Generally,
a lender will place a lien on the car, which means that the lender
reserves the right to reclaim the car if the borrower fails to make
payments.
It is good practice to shop around before choosing
a lender.Primary lending
sources are commercial banks, finance companies and credit unions.Another source that has gained popularity in recent years
is the manufacturer's own credit company.All of the major car manufacturers can offer their own financing
to the buyer.Many
times they will offer special financing through the dealer that
can save a buyer hundreds of dollars.The dealer sets up these special loans.
Mortgage Loans
The purpose of a mortgage is to make the purchase
of property affordable.For
many people, buying a home or property is their most important investment.Generally, the term can vary between 15 to 30 years, and
interest rates will differ among lenders.As with an auto loan, no additional security is needed
because the property secures the loan.Mortgages can be obtained from commercial banks, mortgage
companies, savings and loan associations, credit unions, and even
the federal government.
Home Equity Loans
Established homeowners have an additional source
of funds available to them.A home equity loan, or second mortgage, allows the
consumer to borrow against the equity in his or her property. Equity
is the difference between what is owed on a house and its current
market value.A home
equity loan may be used for almost anything including home improvements,
college tuition or bill consolidation.The loan can either be a simple installment loan or revolving
loan. A revolving loan gives the borrower a line of credit to be
accessed with checks, allowing it to be used again as needed.Funds can be used in varying amounts
at any time and, as payments are made, the credit line is restored.
Based on your personal financial situation, you
may be able to borrow up to 100% of your available home equity.Payments are usually made over
a term longer than other types of consumer loans.Interest rates may be lower than
most personal loans because the lender assumes little risk. In addition,
the interest may be tax-deductible (consult your tax advisor).Home equity loans can be obtained from a variety of sources
such as commercial banks, finance companies, credit unions, and
savings and loans.The costs can vary depending on
the lender, so it is wise to compare.
Student Loans
Student loans are designed to help students and
their parents meet the high cost of college tuition.The federal government, through
commercial banks, subsidizes many of these loans.Interest rates on federal student
loans vary, and repayment may begin after graduation.No previous credit history is
required for a federal student loan.In fact, a student loan can help establish one.Since the loans are offered through
commercial banks, the payment history is reported to the credit
bureaus.Consult a
commercial bank for all of the details regarding these loans.
Marine Loans
This type of loan is similar to an auto loan.Marine loans are secured by the boat, and offer a fixed interest
rate throughout the 15-year life of the loan.The maximum loan amount is generally $500,000. A 20% down
payment is usually required for new boats and 25% for used ones.Any boat in excess of 27 feet
must be federally documented, and all loans must be filed with the
United States Coast Guard.
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