A Beginner's Guide to Finding a Loan

 by: John Mussi

Finding a loan can be a hassle sometimes… though there may be a large variety of options available, it can be difficult to determine which of the choices available to you will best suit your needs.

One of the best ways to find a good loan that will meet your needs is to shop around, comparing loan rates from different lenders and seeing whether a traditional lender such as a bank or finance company is best for you, or if you would do better with a low-interest loan from an online lender.

If you're new to lending as a whole, however, you might become even more confused by some of the options that are available to you… to help ease your confusion, here are some of the most common options that you might encounter.

Secured and Unsecured

Most any loan that you get is either going to be secured or unsecured. What this means is that you may be required to use some form of property that has value to guarantee repayment of the loan known as collateral.

A secured loan is one that requires collateral, whereas an unsecured loan does not. The security provided by collateral also tends to bring lower interest rates as well.

Financing and Mortgage

Mortgages and other financing are a special type of loan… they are secured, but the item that they are used to purchase serves as the collateral. Financing is usually used when purchasing items that have a high value, such as automobiles and some electronics; a mortgage is a specific type of financing, and is used when purchasing a house or other real estate.

Interest rates and repayment terms can vary depending upon the amount of money that was paid as a down payment, the total amount borrowed, and the amount of time that the financing covers which may be for as little as one to five years, or as high as thirty.

Homeowner Options

If you already own a home or other piece of real estate or have at least repaid a significant portion of the mortgage that was used to purchase it, you may also have the option available for a homeowner loan.

This type of loan uses the value of your home equity (which is the percentage of the home that has been paid for, in comparison to the total value of the home) to offer lower interest lending options to individuals who have either good or poor credit.

Many lenders will offer these as a lending option, though online lenders may do so as a way to offer individuals with bad credit interest rates that are competitive with those that many banks reserve for customers with higher credit scores.

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