The Different Types of Loans
There are different types of loans and different types of credit available. It is important to be aware of all the loan options available before you make a choice of which one best suits your needs. Look at open-end and closed-end credit, as well as specific loan types.
Types of Credit Loans
There are a number of different types of credit loan options and these fall into the categories of open-end credit or closed-end credit.
- Open-end credit – This can also be called revolving credit and involves making payments each month that are less than the total amount due. These may include credit cards or home equity type loans.
- Closed-end credit – This is a fixed amount of money for a fixed period of time. These may include mortgages, car loans or appliance loans.
Types of Loans
There are many different loan options available and some of these are tied to specific purposes, while others may be cash loans.
- Mortgages – These are secured with your home acting as collateral. The loan is specifically for the purpose of buying property. These loans have among the lowest interest rates in the industry.
- Student loans – These are loans offered to students or their families to help cover the costs of education. There are federal loans and private loans.
- Car title loans – These are secured loans with your car acting as collateral. They are cash loans with flexible interest rates.
- Payday loans – These are unsecured loans with short terms and are based on the size of your paycheck.
- Lending from retirement or life insurance funds – Some retirement or life insurance funds allow you to borrow from them, which effectively means you are borrowing from yourself. Failure to repay the loans may have tax implications.
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