There are many types of loans, and there are many reasons to get one. When thinking about a loan, there are many factors to consider, including how fast you need the loan, whether you have any collateral and what kind of interest rate you can get. Here are some common reasons to get a loan and the best types of loans to consider in each case.
Buying a car
Most people who buy a car use a loan for at least part of the purchase. There are some options for auto loans. Most banks and credit unions offer loans for both new and used cars, and many auto dealerships also provide their own financing. If you have good credit, you might be able to get a cheaper rate from a dealership than a bank.
Buying a house
Nearly everyone who buys a home has to get a mortgage to do so. You usually get a mortgage from either a bank or a credit union, although there are finance companies that provide mortgages. Because your home serves as collateral for the loan, mortgages carry lower interest rates than other types of loans, although you need a good credit score to get the lowest rates. Mortgages carry high closing costs and take a long time to close.
If you are carrying a lot of debt, especially high-interest credit card debt, it can make a lot of sense to get a loan to consolidate that debt. Whether you do a credit card balance transfer, use a home equity loan or do a personal loan, you usually can get a lower interest rate and also consolidate your debt into one loan with one payment, which is much more convenient and makes it less likely you will miss payments.
You never know when an emergency is going to strike, whether it is huge medical bills, a major problem with your car or a furnace that has puffed it’s last bit of heat. In those cases, you may need a loan to pay for the emergency. Fast installment loans that allow you to borrow money quickly can be a good choice, and they often carry lower interest rates than using a credit card. You might have other sources you can tap for a loan, such as borrowing from an insurance policy or retirement plan, but it can take awhile to get the money in that case, and not everyone has access to those sources of funds.