Many people come across s financial situation once in life where he thinks about taking a loan. Loan means money borrowed from financial companies, lenders, and banks. People get the loan to resolve their financial problems for a limited time and then return in the given amount of time. Loans are of different kinds and people are taking loans for different reasons. There are two main types of loans one is a personal loan and the other is a business loan. Business loan means a person borrow money from lenders or banks to further invest in his business to grow it or he can take a loan to start a new business. A personal loan has been divided in different criteria’s such as home loan, car loan and many other types but this type of loan has been further divided into two parts short term loans and long term loans.
Loan term loan
Loan term loans are being taken by people and business man for long time periods which can start from 5 years and extend to 20 to 30 years. The purpose of taking this type of loan can be different. It can be to purchase a house or to purchase a car. There are other terms which are being used for the loan taken for different reasons such as student loans, wedding loans, start-up business loans, and home improvement loans. This type of loan can be secured or unsecured. Secured loans means that the borrower will submit a guarantee like property papers or such thing which would have market value and get the loan against that and unsecured loans means that there won’t be any guarantee required but the interest rate of this type of loan would be much higher than secured loan because the lender is putting his money at risk by trusting someone.
Mostly for long term loans people go to banks which they are already using for account holdings and all that. Bank checks the credit history and verify the business or job history and then approve the loan. The bank will approve the amount according to the monthly income of the borrower so that he can pay back the loan easily.
Short term loan
People sometimes suddenly comes across a problem where they need money on an urgent basis, it can be for any medical emergency, or school fee, house repair or any such problem. In that situation, people go for short-term loans. Many people do not know how short term loans work. People go to those lenders who are giving short term loan of small amounts which needs to be pay on next payday and that is the way this type of loan is called payday loan. This form of the loan is unsecured because there is no documentation or any kind of guarantee and the amount of the loan can start from 100 dollars and can go to as much as 5000 dollars. Different lenders have different policies and rules and regulations for this type of loan. many lenders want the money back in one go and some give the opportunity of returning the loan in installments which will have a higher interest rate.