There are different types of credit available. Some people rely on cash advances online while others keep a home equity line of credit to help with emergency costs. Before you make a decision to solve a money problem, it may help you prevent further problems to know all different types of credit available.
A cash advance is one short-term money option.
- There are a few options in this short-term lending category. There are both store and online options for cash advances, payday loans and title loans. The payday and cash advance loans are similar in that they both carry a 2 week term and typically loan a few hundred dollars at a time. A title loan is based on the value of the vehicle therefore tend to offer larger loan amounts with a 30 day term. These loans will not be reported to the credit bureau unless they fall into default.
- Consumer installment loans are loans with a set amount of money to use for purchases or other expenses (an option for debt consolidation) and in the contract, the borrower agrees to pay a certain amount of money each month until it is paid off. People with low credit scores may have a hard time finding a lender to service this type of loan.
- Credit cards are a type of open-ended loan. The borrower is given a set available limit to spend and may use it whenever and wherever a credit payment is accepted. As long as you keep paying a monthly minimum payment, this line of credit stays open and available.
There are three types of home loans.
- A home purchase loan is used to do just that, purchase a home. The loan is secured by the property until it is paid off.
- A home refinancing loan will replace the initial home purchase loan. This loan is typically used to lower payments or secure a new interest rate. It may also be used to take out extra money in order to to make home improvements and sometimes investments.
- A home equity loan is based upon the current value of the house minus what is owed. A lender will usually let an owner borrow up to 80% of that figure. The money usually comes as a lump sum or it could be utilized as a line of equity where a homeowner borrows as needed. Interest varies and will rise and fall while the loan is out.
With all of these loan options come fees and interest. A borrower is charged a certain percentage against the outstanding principle each payment period. If your credit is good enough to get you a loan from a bank, it will also be used to determine the amount of interest you will be charged. Unfortunately, the lower your score, the higher the interest will be. No credit check loans are cash advances, payday loans and title loans. They are well known for their high interest no matter what your score is. You pay a bit extra for the convenience of fast cash. Be careful when securing property in order to obtain money. With all types of loans, make sure you have a payment plan intact before taking the money. Your credit score is defined by your debt management skills not your income.
