There are a lot of different types of loans that you will have to choose from, and some of them will be able to meet your specific needs better than others. The more time you take to do this research, the better of a decision you will be able to make. It’s important to remember that you don’t want to select just any kind of loan.
Conventional Loans
There are “conventional loans,” which are loans that are backed by government agency, such as the U.S. Department of Veterans Affairs. These loans come with the least amount of risk, and many different financial institutions give them out. It is important that you take the time to look into this particular option.
Conforming Loans
A “conforming loan” is one that conforms to the guidelines laid out by Freddie Mac and Fannie Mae. The primary guideline of these loans is the maximum amount that can be borrowed. The maximum borrowing amount varies greatly depending on the location of the applicant. If you live in a high-income area, you may be able to borrow more than someone who is lives in a lower-income area.
Non-Conforming Loans
A non-conforming loan does not adhere to the guidelines set forth by Fannie Mae and Freddie Mac. If you need a loan amount that is on the larger side, you will most likely want to take out a non-conforming loan. A jumbo loan is one example of a non-conforming loan. It’s important that you take some time to look into these different types of loans so you can get a better sense as to what each one is all about.
Secured Loans
A secured loan is one that requires that you put up some sort of collateral. Whether it is your house or car, you will need to be willing to sacrifice one of your more valuable possessions in the event that you cannot pay the loan off for whatever reason. The interest rates on these loans are typically low, which is one of the best things about them. The higher the valuable of your property is, the more you will be able to get from the loan. Your credit score/history will also be taken into consideration with this type of loan. If you are not able to put up any valuable possessions as collateral, chances are you will not be approved for the loan.
Unsecured Loans
An unsecured loan is one that is not backed by any type of collateral. One of the reasons that so many people like these loans is because they don’t need to risk losing any of their property if they are unable to pay it back. It is important to keep in mind that the interest rates with these loans are typically higher though. If you have a good steady income and great credit, an unsecured loan can be a great option for you.
Open-Ended Loans
Open-ended loans are also not backed by any sort of collateral, so the interest rate and size of the loan are determined entirely by your income as well as your credit history. If you have a great credit score and sufficient income on a regular basis, your chances of getting this type of loan is pretty good. The lender will approve you for a certain amount of credit based on a percentage of your home’s overall appraised value, minus the amount you still owe on the mortgage. The total acts as a credit line that you can borrow from, pay back and borrow from again.
Closed-ended Loans
You cannot borrow from a closed-ended loan again like with mortgages or student loans. The loan decreases with each payment you make. If you desire more credit, you will need to apply for an entirely new loan. If you need a set amount of money and nothing more, this is a good borrowing option that you should look into.
There are many different types of loans that you can take out, and it’s highly recommended that you do your research before deciding on one in particular. The more information you gather on these loans, the better your chances will be of getting exactly what you need.
