Four Different Loan Types: 3 Good, 1 bad!

Four Different Loan Types 3 good 1 badWhen you are in the market to borrow money, it is important to know what your options are. Regardless of whether it is a large or small amount, you have several to choose from. Do you want a long-term or short-term loan? Think all these things over before you are bound by a contract. Here are three options that you have in regards to a loan.

  • Open-Ended Loan: This is a loan that you can borrow on over and over. Mainly credit cards and actual lines of credit are used under this term. Basically you have a purchase limit that you can borrow against. The credit limit that is available goes down every time there is a purchase made. Then when you make payments it increases your limit again.
  • Close-Ended Loan: These are often compared to loans that you can only borrow on one time. Once you make payments the balance goes down. The largest difference here is the fact that if you need more money, you will need to take out a different loan. The three most popular forms of a close-ended loan are vehicle loans, student education loans, and home mortgage loans.
  • Conventional Loan: This is another type of home mortgage loan. The difference is that it is not governed by the FHA or VA at all. Conventional loans always follow the more traditional regulations set forth by Fannie Mae or Freddie Mac.

There is one specific type of loan that you should not even entertain, no matter how tough times get for money. The repercussions of this loan can be detrimental.

  • Payday Loans: These quite simply are short term loans taken against your paycheck. These have outrageously high interest rates and due to these high rates it can be extremely difficult and sometimes impossible to pay off.

 

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