Different Types of Consumer Credit Loans
There are many kinds of credit loans one can apply for, all of which comes with a different set of terms, ranging from permission documentation between family members or friends, as well as complex loans, which includes auto loans, payday loans, mortgage, and student loans.
It’s not only people who lend money, but also credit unions, banks, and other financial institutions. The truth is, everybody requires a little help sometimes. Even the bank, which seems like a rather unsettling idea, but it’s true.
Banks and credit unions often lend people money so that they can afford the necessary items, such as their car, their home or even a student loan.
Other loans, such as business loans, are usually only available to a selected group of individuals.
It doesn’t matter what the type is, nor the conditions of repayment, all loans are overseen by the state which it was issued in, which ensures the guidelines of consumers are protected from unethical lenders.
Open-end and closed-end credit options
Open-end credit can be used to make purchases, which should be repaid monthly. This type of credit is also known as revolving credit. Paying the full amount is not required, as it is broken down into installments to suit your financial needs. Some of the most common forms of open-end credit, is home equity loans, credit cards, as well as home equity lines of credit.
Open-end credit is used for daily expenses, clothing, and transportation. These tend to have interest charges to monthly installments, which varies between 12% and 15%, in most cases. Some, however, can be as high as 30%, but it all depends on the consumer’s payment history, along with his/her credit score. These two factors will be considered before a consumer can qualify for a loan.
Closed-end credit also works with installments. It is primarily used for financing something specific and will require consumers, to follow a payment schedule, which includes interest charges, until the principal amount is paid off.
Any interest charged to installment loans will vary from lender to lender. Closed-end credit loans are especially strict on a consumer’s credit score, and can even seize one’s property, as compensation, if the consumer fails to repay the loan. Given these factors, it is best to choose an open-credit loan, if you need to obtain one.