Borrowed money can be utilized for a variety of things, from buying an engagement ring to funding your business dream. However, with the various types of loans available to Texans and others, which one is the best option for what purpose? Here’s a quick look at a few types of loans and how they should work.
When it comes to Houston loans, one popular type is the personal loan. Most financial institutions offer this type of loan, and you can spend them on nearly anything you like, whether it’s bills or a new Sony curved TV. These loans tend to be unsecured, meaning you don’t need any collateral and most of the time, the period for repayment can be anywhere from 2 to 5 years.
Generally, to borrow money in this way, you’ll need to verify your income, and you might need to prove you have assets totaling as much or more than the amount you’re borrowing. Generally, the application is relatively short, and you’ll know whether you’ve been approved or denied within a short time.
Home Equity Loans
There are a few different types of home loans, and a home equity loan is one. If you own a home, you can actually borrow against any equity in that home you may have built up. This, in layman’s terms, means that you can borrow against the percentage of the building that you’ve already paid for and own. If you’ve managed to pay off three-quarters of your mortgage, you should be able to borrow an amount that’s equivalent to three-quarters of the mortgage. Another way to figure this amount is to subtract the amount you still owe on your mortgage from the current fair market value.
There’s also something known as a bank guarantee that’s an interesting option to know. It differs from a bank loan in a key way. Say you take out a bank loan. In that case, you get the funds, right? That’s not the case with a bank guarantee. A bank might issue a guarantee as a form of surety to another party on your behalf. In other words, if you default on the terms of your contract with that other party, the bank can be held liable.
Each time you pay for something with a credit card, you’re essentially taking out a small personal loan. If you pay off that balance immediately, there won’t be any interest charged. However, if you wait to pay off the balance, interest will be charged each month until you pay it off.
The massive difference between personal loans and credit cards is that the cards represent what is known as revolving debt. That is, there’s a set limit to what can be charged, and you can borrow money repeatedly up to that limit and then pay it back over a period of time.
This was just a quick look at a few of the types of loans there are available. While options like credit cards and personal loans might be a bit less cost-effective, they’re easier overall because you generally don’t have to deal with the hassle of collateral. On the other hand, a home equity loan will give you a more cost-effective rate of interest, but you’ll be risking the roof over your head when you have to use it as collateral. If you need money, there’s an option that’ll be the ideal one for your situation. Just don’t rush into it. Take your time and determine what the best choice is for you.