Loans. They’re not something that everyone deals with, but some people have to deal with the burden of them every day. If you go to college, buy a home, or get a car, you’ve most likely had to take out a loan in some point in time.
There’s a lot of hoops and stuff that people have to jump through to get some loans, and then other loans are a simple, streamlined process. Today, we’re going to look at 4 of the most common types of loans and talk a little about how you obtain each of them
1. College Loans- Out of all of the loans we’ll cover today, these are probably the simplest to obtain. Why? Because you get most of them approved by the Free Application for Federal Student Aid (FAFSA). Stafford Loans and Perkins Loans are both based on need and are a result of filling out the FAFSA. Then, private loans just take the information from the FAFSA and use it to determine your eligibility as well.
2. Home Loans/mortgages- A home will most likely be the most expensive thing you’ve ever owned or bought. It is the loan with the highest risk, and therefore, if your credit score is lousy, you aren’t going to get it. To get a home loan, you need to go to your local bank or credit union, and you most likely need a cosigner. Good news? You’re usually married when you buy a home, so there’s a built in co-signer. The person in charge of loans at your financial institution is the one who will guide you along in your decision making process.
3. Car Loans- Car loans make up most of the loans taken out in a year (outside of student loans). Because they are lower risk, it’s more common for someone to take out a car loan before any other type of loan. These loans are less likely to require a co-signer unless your credit isn’t doing well. Usually, you can get these loans from a bank or from the car dealership that you are purchsing from.
4. Small business loans- The most complicated type of loan to get is the small business loan. Not only do you have to have decent credit and a co-signer to get the funds from these loans, you also need to have a business plan that is approved by the bank you are applying for your loan through. If you are adding on to a business that already exists, you need to work with your bank to determine if the additional funds are an acceptable reason to take out another loan. Usually you’d do that for an addition to a building or to get new technology. They also look at the health of your business and the potential for those funds to be paid back instead of defaulted on.
Most people in the United States have taken out some sort of loan, have you? Which of these have you taken out? Share some thoughts in the comments and have a great week!