The lending world is complex and confusing. Credit is an abstraction. It is a system that is designed to make people think that they can afford things they can’t. Whether you are in a lot of debt, trying to find funds to start your business, or are simply trying to build a credit score, there are plenty of loan options to get the job done.
Even if you have a bad credit score, often taking a loan is the best way out. It is counter-intuitive, but you can solve your financial problems with the right loan. Of course, you need to pay off the money as soon as you can to keep your interest low, but if you can make the payments and raise your credit. Here are five loans you should know about.
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Starter Loans
Starter loans are exactly what they sound like, loans to get started. When you don’t have any credit, you can take out one of these loans designed to give you a fighting chance at approval and paying the money back on time and in full. Starter loans are great for people who have no credit at all and want to get started. Just do a quick search for starter loans near me and you should be able to find a lender who will help you get started.
Credit-Builder Loans
Like starter loans, credit-builder loans were created to help people build their score. However, these loans are a little different. For example, a credit-builder loan requires that you pay off the full loan before you gain access to any of the funds. This might sound weird, but it’s actually a great thing for those trying to boost their credit score. At the end of it, the loan will be paid off. Your credit will be improved. But you will also have a lump sum of cash. It’s a great way to build your credit score and put yourself in a position that is advantageous to move forward in your financial endeavors.
Debt Consolidation Loans
On the other hand, debt consolidation loans are for those who already have terrible credit. When someone owes various debts to multiple creditors, not only can it feel overwhelming, but you may not know what to do next. While you might be scared to take out a loan in this situation, it can help you lower your interest rate by putting all the money you owe into a single monthly payment with just one rate of interest. It also eliminates the need-to-know which debt you should pay off first because they will all be paid off. It will be clear to you, and you will be able to tackle the full scale of your debt head-on.
Personal Loans
Personal loans come in two forms, secured and unsecured. Depending on your credit score, you could be approved for an unsecured loan. Secured loans require collateral while unsecured loans rely on your credit score for approval. Some real estate loans are considered secured personal loans when they require that you use the house as collateral. This is typical when it comes to certain refinancing options. Whatever you want to use the money for, knowing the difference between a secured and unsecured personal loan will help you make a decision.
Business Loans
Of course, there are also business loans. These loans are dependent upon how much money you need, how big the business will be, and how successful the lender thinks it will be. Big business loans typically come from banks and small business loans are more commonly alternative loans. Alternative lending is now a huge market. When you are trying to get your business off the ground, you will need capital. While there are a variety of ways to obtain the money you need to get started, a business loan could help.
These five types of loans are just the beginning. There are many more nuances and other types of loans to research. The most important thing is to know what you are doing before you do it and to focus on the best move for yourself, your business, and your family. Whether you are trying to get out of debt, raise your credit score, or open a business, loans should be used properly to get the most out of them.