Types of Loan:The two major types of loans are the Unsecured and the Secured loans

Types of Loan:The two major types of loans are the Unsecured and the Secured loans

Loans definition:Loan is something which is owed. All the material things possessed can be given to somebody but the term loan is mostly used for monetary transactions involving the lender and the borrower. A lender lends money to a borrower and the borrower repays this loan in monthly installments or as a lump-sum amount to the borrower. However, the lender lends his money to the borrower at a fee known as interest on the borrowed amount.

This fee is the reward to the lender for the opportunities the lender has missed of new valuable savings that the lender could have made from the lent amount. Obviously a loan is provided with certain terms and conditions to ensure that the borrower gets his money back within the stipulated timeframe fixed at the time of giving the loan. In modern times the banks and financial institutions act as the lenders and the people and organizations borrowing money from them are the borrowers.

In olden days the rich people used to lend money to the poor against the security of land / house and since the poor people takingloans were illiterate the rich people exploited them and confiscated their land / house even though the borrower was repaying the amount, to avoid this exploitation the law came into force and certain terms & ; conditions were laid for taking and giving loans .

Legal Definition:In legal terms loan refers to a formal assurance agreement of a debtor to pay back a sum of money in return for the assurance of a creditor to give another sum of money .

Types of Loan:The two major types ofloans are the Unsecured and the Secured loans .

Unsecured Loans:The unsecured loans are available from financial institutions under different pretext viz. personal loans, loans on credit cards, bank overdrafts etc. The interest rates for the unsecured category ofloans are different and vary depending on the borrower and the lender and may or may not be regulated by law for eg. in the UK if a person avails unsecured loan it is covered under the Consumer Credit Act, 1974.

Secured Loans:A loan taken to buy real property is called a mortgage loan. In this type of loan, loan amount is used to buy property, however the financial institution or the bank i.e. the lenders are given rights on the property till the loan is repaid in full by the borrower. If the borrower is unable to repay the loan, the bank / financial institution i.e. the lender has full legal rights to confiscate the property and sell it off to recover the defaulted amount .

A mortgage loan can also be used for automotives like cars and works the same way as for property but the period of loan is shorter depending on the life of the car. In autos there are directloans and indirect loans. The direct loan is given directly to the buyer whereas in the indirect loan the auto dealer acts as a mediator between the bank / financial institution and the buyer.Today majority of people use the loan facility to buy property, cars, renovation of homes, marriage expenses etc. even big organizations take loans to run their businesses. Many companies also provide interest free loan facilities to their employees, even employees of banks and financial institutions enjoy this interest free loan facility.

Understanding Different Types of Loans:Today's homebuyer has more financing options than have ever been available before. From traditional mortgages to adjustable-rate and hybrid loans, there are financing packages designed to meet the needs of virtually anyone.While the different choices may seem overwhelming at first, the overall goal is really quite simple: you want to find a loan that fits both your current financial situation and your future plans. Though this article discusses some of the more common loan types, you should spend time talking with different lenders before deciding on the right loan for your situation.

General categories of loans:Most loans fall into three major categories: fixed-rate, adjustable-rate, and hybrid loans that combine features of both.

Fixed-rate mortgages:As the name implies, a fixed-rate mortgage carries the same interest rate for the life of the loan. Traditionally, fixed-rate mortgages have been the most popular choice among homeowners, because the fixed monthly payment is easy to plan and budget for, and can help protect against inflation. Fixed-rate mortgages are most common in 30-year and 15-year terms, but recently more lenders have begun offering 20-year and 40-year loans.

Adjustable-rate mortgages (ARM):Adjustable-rate mortgages differ from fixed-rate mortgages in that the interest rate and monthly payment can change over the life of the loan. This is because the interest rate for an ARM is tied to an index (such as Treasury Securities) that may rise or fall over time. In order to protect against dramatic increases in the rate, ARM loans usually have caps that limit the rate from rising above a certain amount between adjustments (i.e. no more than 2 percent a year), as well as a ceiling on how much the rate can go up during the life of the loan (i.e. no more than 6 percent). With these protections and low introductory rates, ARM loans have become the most widely accepted alternative to fixed-rate mortgages.

Hybrid loans:Hybrid loans combine features of both fixed-rate and adjustable-rate mortgages. Typically, a hybrid loan may start with a fixed-rate for a certain length of time, and then later convert to an adjustable-rate mortgage. However, be sure to check with your lender and find out how much the rate may increase after the conversion, as some hybrid loans do not have interest rate caps for the first adjustment period.

Other hybrid loans may start with a fixed interest rate for several years, and then later change to another (usually higher) fixed interest rate for the remainder of the loan term. Lenders frequently charge a lower introductory interest rate for hybrid loans vs. a traditional fixed-rate mortgage, which makes hybrid loans attractive to homeowners who desire the stability of a fixed-rate, but only plan to stay in their properties for a short time.

Balloon payments:A balloon payment refers to a loan that has a large, final payment due at the end of the loan. For example, there are currently fixed-rate loans which allow homeowners to make payments based on a 30-year loan, even though the entire balance of the loan may be due (the balloon payment) after 7 years. As with some hybrid loans, balloon loans may be attractive to homeowners who do not plan to stay in their house more than a short period of time.

Time as a factor in your loan choice:As has been discussed, the length of time you plan to own a property may have a strong influence on the type of loan you choose. For example, if you plan to stay in a home for 10 years or longer, a traditional fixed-rate mortgage may be your best bet. But if you plan on owning a home for a very short period (5 years or less), then the low introductory rate of an adjustable-rate mortgage may make the most financial sense. In general, ARMs have the lowest introductory interest rates, followed by hybrid loans, and then traditional fixed-rate mortgages.

FHA and VA loans:U.S. government loan programs such as those of the Federal Housing Authority (FHA) and Department of Veterans Affairs (VA) are designed to promote home ownership for people who might not otherwise be able to qualify for a conventional loan. Both FHA and VA loans have lower qualifying ratios than conventional loans, and often require smaller or no down payments.

Bear in mind, however, that FHA and VA loans are not issued by the government; rather, the loans are made by private lenders. FHA loans are insured to the actual lender and VA loans are guaranteed in case the borrower defaults. Remember too, that while any U.S. citizen may apply for a FHA loan, VA loans are only available to veterans or their spouses and certain government employees.

Conventional loans:A conventional loan is simply a loan offered by a traditional private lender. They may be fixed-rate, adjustable, hybrid or other types. While conventional loans may be harder to qualify for than government-backed loans, they often require less paperwork and typically do not have a maximum allowable amount.

Secrets & Benefits of Secured Loans:Borrowing money has become more and more popular in the UK over recent years, and this is partly due to the fact that it has become far easier to borrow money. The rising popularity of consumer finance has also been aided by the wide variety of deals and the low interest rates available these days. Secured loans have become very popular with those that own property, and this type of finance deal offers affordability and excellent value for money. Secured loans are available from a wide pool of lenders, which means that consumers have plenty of choice when it comes to selecting and applying for secure loans.

The amount available to borrow with secured loans is dependant upon the amount of equity available in your property, which means the amount of the market value minus any loans or mortgage outstanding on it. There are many benefits available with secured loans, and you will find that this type of finance is one of the most cost effective options available. With secured loans you can look forward to far lower interest rates than most standard, unsecured loans, and this is because there is less of a risk to the lender since the loan is secured against an asset.Secured loans also offer far high borrowing levels than unsecured loans, although the amount available to borrow will depend in your equity. However, you could find yourself eligible to borrow tens of thousands of pounds with secured loans, which could prove invaluable if you are looking to raise a large amount offinance for just about any purpose. The repayment period with secured loans is also far longer than with unsecured loans, which means that your monthly repayments will be far lower.

One of the most common reasons for taking out secured loans is to consolidate other loans and credit. Many people pay out a fortune each month on a selection of high credit loans and cards. With secure loans you can wrap up all of that expensive credit in to one convenient loan, and you can then pay just one lot of interest and make just one repayment each month. You can use bad credit secured loans to wrap up your other more costly credit, and even to pay of some debts, and this can go some way toward improving and repairing your credit.

Secure loans are widely available online, and by browsing and booking via the Internet you can quickly ascertain which of these secured loans best suits you in terms of conditions and interest rates. It is always wise to compare the various deals available on secured loans in order to check that you are getting a competitive deal and rate.

Whatever you are looking to fund or purchase, secured loans make it more affordable and more achievable. If you are using a secure loan in order to consolidate your other loans and credit, you can look forward to far lower repayments each month as well as an overall reduction in the amount of interest you pay. Finding, comparing and applying for secured loans is simple when you harness the power of the Internet, and you can rally speed up the process as well as benefit from total convenience and ease. You are also more likely to find really competitive deals on secured loans when you look online, giving you an even better chance of getting great value on your borrowing.If you find yourself in need of a fairly large sum of money and you have equity in your property, it makes sense to look into the range of secured loans available.

With such great deals on offer when it comes to secured loans, this is by far the most cost effective option open to property owners. With many people sitting on large sums of money that is tied up in their property, paying extortionate fees on some unsecured loans makes little sense when you could enjoy far better rates with secured loans, which simply enable you to unlock the money that would otherwise be tied up in your property.

| Food | | Gift | | Relationship |

POST COMMENT

The Fundamentals of Mortgage Loan Payday Loans Direct Deposit-Great financing without any obstacle Logbook Loans- Easy source of finance against logbook of your car Personal Tenant Loans – Complimentary To The Non Possessors Connect Overseas- Monthly Overseas Mortgage Report Unsecured Loans: Meet your unlimited desire with unsecured loan Quick 12 Month Loans – Instant Monetary Support Loans for Discharged Bankrupts-Grab easy funds without any stress at all Instant No Fax Loans- Reliable aid to meet short term problem Next Day Payday Loans - Would be granted at earliest hour Payday Loans - Safe Solution For Mid-Month Fiscal Shortage Read Between The Lines While Insuring Your Mortgage Rising Bank Fees dreaded notices