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The Covid 19 pandemic continues to have a huge impact on the everyday lives of people across the world. Individuals are worried about not just their own physical health, but also the well-being of their families and loved ones. Those concerns are compounded by the financial hardships that many people are now facing. Millions of workers have lost their jobs, had their salaries cut, or been obliged to join a government wage-supplement scheme. In such cases, a loan may help to ease any financial pressures, but which is the best kind?
Loans From Traditional Banks And Lending Institutions
We may be tempted to think that a loan is a loan is a loan: somebody lends us money, then we pay them back the full amount, plus some interest. And at the highest level, that is the case. But wander into any bank, and you soon realize just how many different types of loan there are, each offering different rates, eligibility, terms, and conditions.
Appliance loans, auto loans, business loans, home equity loans, loans for veterans or farmers, mortgages, payday loans, personal loans, student loans: all these and more are available from traditional banks and lending institutions. Depending on your exact circumstances, one of these may be exactly what you need to see you through these challenging times.
Loans From Online Banks
If you are looking to take out any sort of loan, we strongly recommend that you also check out the range of leading online lending companies. By and large, the choice online is exactly the same as with banks, credit unions, and building societies. Most traditional lenders do now have a complete online service, but here we are talking about online companies that have no physical branches.
There are a number of advantages to applying for a loan with an online lender. In general, the process is much easier and faster, the rates are often more competitive, and because different criteria are used, you may be able to secure a loan where a traditional lender has turned you down.
So let us now consider three different types of loans, all of which are available from traditional and online lenders.
Personal Loans
By their very nature, personal loans can be used for whatever purpose you want: a holiday, a wedding, new furniture, or consolidating credit cards and other debts. Because they are usually unsecured, personal loans carry higher interest rates than equivalent auto loans or mortgages. But those rates are considerably cheaper in comparison to credit cards, making them an excellent choice if your cards are maxed out (just resist the temptation to build up debt again on your cards!).
Personal loans are quick, easy, and convenient, but approval and the rate you get are often dependent on your credit history and income.
Home Equity Loans
If your house is worth more than the money that you owe on it, then you can often leverage that equity for a loan. Home equity loans use your home as collateral, which means that interest rates are typically lower than with an unsecured loan. This is a great way of securing funds for a big project like building an extension, or for consolidating other high-interest debts such as credit card liabilities.
Home equity loans feature a fixed rate and monthly repayments, whereas home equity lines of credit (HELOCs) offer variable rates and more flexible payment schedules. In both cases, if you sell your house, the outstanding debt must be repaid.
Auto Loans
With a mortgage, you do not own your home until the full amount is paid off. Most auto loans operate on the same principle. They are very practical and can help you afford a car, but it is not your property until you make the final payment. And if you miss a payment, you may lose your vehicle.
Auto loans are available from most lending institutions, or from car dealers themselves. In the latter case, the loan may be provided via an affiliate bank, via the car manufacturer’s own dedicated bank, or via an associated lender. Perhaps more so than with other forms of borrowing, it is worth shopping around for auto loans: dealer loans are highly convenient, but the rates are not always the best, and you may well be able to find a better deal elsewhere.
Stay Safe And Check Legit!
With trusted, traditional brick and mortar banks, you can be 100% sure that the company is legit. If you are taking out a loan online, however, you need to take a little more care, although the vast majority of online lenders are fully legal, regulated, and secure. In fact, when you delve a little deeper, you often find that the online lender is owned by a well-known company that is every bit as trustworthy, reliable, and secure as the high street banks. Sadly, there are still some sharks out there, so if you have any doubts whatsoever, walk away: there are always plenty of other lending options.
