Different Kinds of Loans Explained
When financing things in all aspects of your life, like significant purchases, starting a business, or covering unexpected expenses, personal loans can be a great option.
Whether you’re looking to make a big purchase or need extra support, read on to learn more about the different types of loans and which type would be best for you.
Borrowing for a car
Car loans are used to finance a vehicle upfront while giving you a reasonable repayment timeframe. They are typically secured, meaning that the vehicle being purchased is used as collateral. This means that if the borrower defaults on the payments, the lender has the right to seize the vehicle.
Car loans typically have a fixed interest rate, a set repayment period, and regular monthly payments. The lending amount, interest rate, and repayment period will depend on various factors, including the borrower’s credit score, income, and the price of the vehicle being purchased. This type of loan can also be used if you have a damaged, uninsured car and need some money to cover repairs.
Emergency loans can help you deal with a costly problem to cover unexpected or urgent expenses. These loans typically have a quick application and approval process, so borrowers can get the funds they need quickly. Emergency loans can come in various forms, including personal, payday, and credit card advances.
However, it is essential to note that these types of loans often come with high-interest rates and fees that can quickly lead to a cycle of debt if not repaid promptly. Therefore, we recommend you only apply for one as a last resort.
A debt consolidation loan allows you to pay off existing debts by combining them into a single loan. Often, this means a lower interest rate and potentially lower monthly payment.
Borrowing for a wedding
Planning and hosting a wedding can be highly stressful, with so much attention to detail required and so many different costs, from catering to buying a wedding dress. Wedding loans help families celebrate one of the most critical milestones in a person’s life without having to endure the mental stress of funding the event.
Borrowing for a holiday
When you suddenly have the time to travel but not the budget, a holiday loan comes in handy! Interest rates are typically fixed for holiday loans, making it a comprehensive way of financing your travel and holiday.
An unsecured loan doesn’t require collateral and is approved based on creditworthiness. Collateral used for security often includes high-value assets, such as land or vehicles, so when you don’t need to secure a loan with a purchase like this, it’s an unsecured loan.
Unsecured loans are generally the best bet if you’re looking for fast cash.
Need a loan without the stress?
MoneyShop has assisted thousands of Kiwis with their finances since 1993! We have four branches in Auckland (Otahuhu, Manukau, Henderson, and Takanini) and one in Northland. We offer a variety of personal loans, between $200 and $20,000, available within as few as two hours. You can apply for a loan with us online here.