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Diverse Variety Of Money Lending Helps Consumers Meet Every Need

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Money Lending
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There are different types and forms of money lending available on the market that helps the consumers to meet with their diverse financial needs. All these different forms of loan contracts come in varied terms as well. Typically, when you research on the types of loans and credit you will come across a few orthodox ones along with others. It may include complex loan such as:

  • Mortgage
  • Auto loans
  • Student loans
  • Home loans and
  • Payday loan.

It also consists of simpler loans such as simple promissory notes between family members or friends.

The sources of such loans are also as varied as the types of loans available and include:

  • The traditional banks as you know
  • Different credit unions
  • Other private money lenders and
  • Different online sources such as libertylending and others.

In addition to that, select groups of people can also borrow money from the Department of Veterans Affairs as well.

These sources not only offer personal loans to individuals but also provide small and large businesses with their necessary fund for business expansion, purchase of raw material and machinery and operation.

Governing the loans

All these loans offered are typically governed by the guidelines formulated by the state and federal departments irrespective of its type, size, conditions for repayment and terms. These guidelines are designed to protect the consumers from the common and unsavory practices of the money lenders to charge excessive interest rates from them.

According to the guidelines, all money lenders should make everything clear to the consumers regarding every aspect and clauses of money lending. The loan contract should specific everything in details including:

  • The loan amount
  • Its length or time period and
  • The terms in case there is a default by the borrower.

All these are designed with an intention to avoid any confusion that may give rise to potential legal action.

When it comes to default, the money lender should include the collection terms and fees charged on the outstanding debt so that both the lender as well as the borrower may have a clear idea about the collection costs involved. This also applies to the parties of promissory notes.

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The kinds of loans

When you need money to buy an essential item or simply to make your finance and life more manageable, it is a good idea to be familiarized with the kinds of credit and loans available on the market along with the types of terms it comes with. This will help you to choose the right type of loan for your needs and also help you to know what you can expect under different circumstances.

Open and closed-end credit options:

These are the two primary categories of consumer credit. As for the openend or revolving credit, its features include:

  • It can use repeatedly to make purchases and can be paid back monthly
  • You do not need to repay the full amount due every month
  • The most common form of such credit is the home equity loans and the (Home Equity Lines Of Credit or HELOC
  • Credit cards are also a type that may carry an interest within the range of 15% to 30% apart from 0% introductory ones.

Closed-end credits, also known as installment loans are those types that finance a specific need for a specific time period. The regular monthly payment schedule includes interest charges that vary according to the credit score of the borrower until the principal is repaid. Few types of closed-end credit include:

  • Mortgages
  • Car loans
  • Appliance loans and
  • Payday loans.

The lender can seize the property of the borrower if it is attached as collateral in case of defaults on the loan.

Other common types of loans

Apart from the above types of credit, there are a few common types of loans that are offered by money lenders.

1- Debt Consolidation Loans:

These are loans that simplify your debts by rolling multiple debts into one single and larger loan. Used extensively to consolidate credit card debts, these loans offered as second mortgages or personal loans come at a lower rate of interest and for longer period of time thereby reducing the number of loans and the monthly amount paid but certainly not the outstanding debt amounts.

2- Student Loans:

Not requiring much explanation there are two basic types of such loans that will allow you to cover the costs of higher education. These are private student loans and federal student loans. Typically the federal student loans are better for its low-interest rates as well as more borrower-friendly payment terms.

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3- Mortgages:

These loans will allow you to buy your homes which you cannot pay for upfront and carries the lowest rate of interest as compared to all types of loans. However, your home will be the collateral for your loan meaning that you risk losing it as foreclosure if you fall behind on your debt payments schedule.

4- Auto Loans:

Similar to mortgages, these loans help you to buy a car that is attached to your loan. These are offered by banks but a car dealer may also make an offer but ideally at a higher rate of interest thereby costing you more in the final outcome.

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5- Personal Loans:

These are unsecured loans given on the basis of your credit. You can use it for any purpose, no questions asked.

6- Loans for veterans:

Known as VA loans these are offered by the Department of Veterans Affairs. Meant for the veterans and their families these loans do not come directly from the department. Instead, they act a co-signer that allows you to get a loan of higher amounts at a lower rate of interest.

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7- SBA:

Small Business Administration loans are offered to entrepreneurs to start or expand their business. The SBA is the best source for small business funding that offers a diverse variety of loans to suit the unique needs of each business.

You may also choose a payday loan at high interest and pay it back on your next payday, cash advance on your credit card and borrow from your retirement accounts or against your life insurance plans.

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