How to Choose the Right Type of Loan for Your Needs

There are a variety of reasons why someone would need a loan. For example, he or she might be ready to purchase a new home, or an individual may need funding to get a brand new business idea off the ground. Others need student loans in order to get themselves through college. But no matter what the reason for getting a loan may be, it’s important to get the right type of loan for your needs. Continue reading to learn more about the different types of loans available and the situations in which they would work best.

License: Creative Commons image source
License: Creative Commons image source

Small Business Loan

If you want to start a new business but don’t have the money, you can get a small business loan from your local bank or directly from the Small Business Administration. Be prepared to submit a formal business plan first, though. This is the only way to prove that you have what it takes to succeed as a new business, and this will give your lender confidence in lending you the money you need. By applying for this type of loan, you can get a few thousand dollars, or even a few million dollars, to get started, but you’ll more than likely have to put some of your personal assets up as collateral to guarantee the loan.

Personal Loan

If you have high bills you need to pay off right away or you need to make a large purchase of any kind, a personal loan would be the way to go. You can get this type of loan from your bank, and it will typically range from a few hundred dollars to as much as a few thousand dollars, depending upon your needs. And you can receive approval within a few days so you can get the money fairly quickly. Keep in mind that this type of loan is unsecured and you’ll need to show proof of income and assets. Also, the interest rates on these loans are higher than on others.

Cash Advance

A cash advance is a short-term loan that’s usually offered by credit card companies. This is a type of loan that’s quite easy to get, but you more than likely won’t get a large loan amount. Most of the time, you’ll get a few hundred dollars to help you make a smaller purchase or pay off an outstanding bill quickly. Interest rates and fees associated with cash advances also tend to be higher, but if you’re in need of money quickly, this is a good option.

Mortgage

A mortgage is what you’ll need to purchase a new home. You’ll make a down payment, which is a percentage of the sale price of the home that you agree to pay, and then you’ll get a loan for the remainder of what you owe. You’ll have to pay interest on that amount. There are different types of mortgages available to suit everyone’s individual needs, including various adjustable rate mortgages and fixed rate mortgages. But for those who cannot receive approval from a bank, hard money loans are also an option.

About the Author: Annie Dickinson is a freelance writer who enjoys writing about anything related to business and finance. With so many different types of loans out there, she knows how confusing it can be to determine which one is right for you. Thankfully, though, once you know your options, you’ll know what direction to go in.

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