Small consumer loans can be used to finance just about anything—from an automobile, to your education, to paying for debts. Depending on the interest rate and other terms, small consumer loans can be a great way to take care of the things you need, as well as to build your credit.
Some of the most common types of loans are:
Traditional Installment Loans
Traditional installment loans (TILs) are unsecured loans that can be used for just about anything, from home improvements to paying large one-time expenses, to investing in a business. TILs have fixed payments, a set timeframe for repayment, and lower interest rates than credit cards or many other types of loans. Lenders do not use security or personal property to secure these loans usually. The customer easily understands the terms and usually pays less interest rate as terms go from 6-18 months.
Title loans are short-term, high-interest loans where the title of your car or bank account is used as collateral. The amount you can borrow is based on its value and the repayment term may be 15 or 30 days. Rates can be in the triple digits.
Payday loans are small-dollar loans that come with incredibly short terms and are meant to be paid off quickly (i.e. by the person’s next paycheck). In many cases, the interest rates are in the triple digits. Payday lenders make loans on terms that are from two weeks to 12 months in general (with many having a balloon payment at the end). These types of loans may come with higher fees that can make it easier for consumers to fall into the cycle of debt.
Credit cards allow you to make everyday purchases through a line of credit. Although they can be relatively easy to qualify for, credit cards also tend to carry higher interest rates than other types of consumer loans, making them less than ideal if the balance can’t be paid off each month.
Auto loans are used to buy cars, trucks, and other personal vehicles. They are obtainable through your own bank or credit union, or available through car dealerships. Be sure to check interest rates and fees on both to determine which is the better deal.
Student loans are used to pay for college or technical school education. The application process is done through a federal website known as FAFSA, and it is not difficult to qualify, even if you have poor credit or no credit.
Home Equity Loans
Home equity loans allow you to use the equity you’ve gained on your home to borrow money. For example, if you owe $100,000 on your home, but your home is worth $150,000, you may be able to borrow $50,000 in a home equity loan. These types of loans are often used to make home improvements, but they can be used for any number of purposes.
To learn more and take control of your finances, use our financial resources. You can even learn how to improve your credit score with small consumer loans!