6 Types of Loans Young Adults Should Know About - Insane Visions

6 Types of Loans Young Adults Should Know About

From time-to-time, everyone runs into a situation where they need access to more money. As long as you have a plan to pay it back, taking out a loan can be a smart decision for a number of reasons. It can help you finance a large purchase, it can be used to consolidate debt, it can raise your credit score, it help you expand a business, or it can be a means to finance your education.

No matter what kind of borrower you are or what situation you have, there’s a loan perfect for you.

 

Installment Loans

Installment loans are probably the easiest to understand. An installment loan is characterized by having small, predictable payments and you usually have access to the money in just a few days. These loans are typically for less than $5,000.

Say you need $575 for auto repairs but you would rather make payments or you just don’t have that much at the time. You could get an installment loan for $575 and make 14 payments of $50. The interest rates are about the same as some credit cards and this way you have a built-in plan for paying it off.

 

Personal Lines of Credit

A personal line of credit is usually issued by a bank. They work a bit like credit cards: You are given a limit usually between $5,000-$10,000. You can borrow from and pay back this money however you want. As you pay it back the line of credit stays open, and you can choose to use it again whenever you want.

The advantage of owning a personal line of credit over opening an additional credit card are: lower interest rates, having a diversified type of credit that could boost your credit score, and building a better relationship with your bank.

 

Cash Advances

Typically provided by a credit card company, cash advances are small amounts of cash you can withdrawal directly from your credit card. If you don’t pay it back before you billing cycle is complete it will draw the same amount of interest as a credit card purchase.

 

Payday Loans

Payday loans are the easiest to get. All you need is a job and proof that they pay you. You can be approved in just a few minutes and have the money the same day.

The downside? Interest rates can be very high. As long as you know you can pay the loan off on time and you absolutely need the money then it may be a good choice. Make sure you have a plan.

 

Small Business Loans

Starting a business can be an exciting, life-altering experience. It can also be a little expensive. If you have a business plan and are ready to start up a small business loan can help you get going. It can also be used to expand an existing business.

Depending on what kind of business you have, how old it is, and if you have employees whether or not a bank lends to you may rely more on your business’s credit score than yours.

 

Consolidated Loans

If you already have several kinds of loans or would like to lower your credit card debt interest, then a consolidated loan is a great choice. Unless you have a nearly perfect credit score (above 750) expect to pay 20% down or more.

Consolidated loans are used to pay off the original debts and, in most cases, offer a single, lower payment and a lower interest rate.

 

Auto Loans

An auto loan is usually taken out to purchase a car, though they may also be issued to pay for repairs.

Although you may be more likely to be approved through a car dealer, it’s usually best to get your auto loan through a bank or credit union. Loans through car dealers almost always come with much higher interest rates.

 

Have A Plan

Since most loans are used in an emergency and nobody really wants to pay interest, you can use these tips to pay off your loans early.

  • Make Sure there is No Early Payoff Penalty-Some lenders charge you a big fee for paying your loan off early because they’ll lose the money you “should have paid” in interest.
  • Make Payments Every 2 Weeks-Payments made bi-monthly will result in one extra payment every year.

 

Conclusion

Between life and student loans budgets can get tight. Consider using popular methods for borrowing money and tools that can help you create and manage your plan. Managing loans and debt is a big part of being fiscally responsible. As long as you pay attention to your finances getting a loan to help you out now or in the future is never a bad choice.

James

James

Hi there, I'm James, editor in chief at InsaneVisions.com and finance journalist. Feel free to message me on Twitter and Facebook. Make sure to subscribe to our mailing visit for the latest finance and tech news.
James

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