Home Philatelic investment A guide to finding the loan that’s right for you

A guide to finding the loan that’s right for you



Editorial credit: Castleski

Before taking out a loan, you should ask yourself what you hope to get out of it. There are tons of different loan types out there, and some of them might be more realistic for your budget, long term goals, and instant needs.

Below we have a quick description to help you understand the difference between the 10 most common loan types. Then you will be able to determine which one makes the most sense for you.

All of the loans below will either be strictly secured or unsecured, or they will have the option of choosing one or the other. For this reason, it’s important to know what the two terms mean and which one is most useful to you.

A secured loan is a loan to which one or more valuables are legally linked. This means that if you don’t pay back your loan, the lender can take that item back as collateral. For this reason, secured loans tend to have cheaper interest rates.

Unsecured loans are more difficult to obtain and cost you more in interest payments because the lender has taken a risk on you. This is because you haven’t tied something to the deal, so defaulting will leave the lender out of pocket. To protect themselves, they will charge you more.

Ideally, secured loans are the best option because if you pay according to the agreement, your item will not be taken away from you and you will be given a cheap loan. However, not everyone has an item that is worth their desired loan amount.


Mortgages are a prime example of secured loans. They are used to buying houses and other goods. The house is often used as collateral if you don’t pay the mortgage. The house is worth the loan amount, which proves to the lender that you can repay the money regardless of the monthly payment.

Of course, you are still required to pay otherwise the house will be taken from you.

This process allows ordinary people to buy homes that would typically take over 40 years to save.

Personal loans

Personal loans can be used for almost anything; weddings, vacations, medical payments, the list goes on. That being said, they tend to have a relatively short time. You are often expected to pay off a personal loan within 84 months.

Depending on your lender, this could be negotiated. For example, CreditNinja.com will customize the duration of your loan to better meet your needs. As long as they can predict that you can repay the loan under the new agreement, they’ll have no problem doing something less generic.

Automatic loan

These types of loans are designed for vehicles. They tend to last for 3 to 7 years and allow the borrower to purchase the car in installments instead of a single payment.

These loans are also often sold by car dealers to help potential buyers bring their cars home. They are sometimes referred to as “Buy Now, Pay Later” loans.

It should be noted that these types of loans often cost double the amount of the initial payment.

Home equity loans

Equity is when you own something that you could sell. Home equity means you own some or all of your home. If you have paid off 50% of the mortgage on your home, you own 50% of it.

A home equity loan is essentially a second mortgage. The idea is that you get a secured loan using the part of your house that you own.

Legally, you can borrow up to 85% of the equity in your home, and this is normally paid to you in one lump sum. You either have to repay this amount over a period of time, or when you die, that part of your house is then returned to the lender. It is a popular option for the elderly.

Credit construction loans

Credit Builders are short-term loans intended to help people who have not yet taken out credit. While people with bad credit can sometimes apply for these loans, the idea is to help those who are just starting out with a good credit history before attempting to secure a larger loan, such as a mortgage.

Debt Consolidation Loans

Consolidation loans are designed to help you streamline all of your debts and consolidate them in one place. This will help you keep track of your payments.

These types of loans are not always labeled as such. This is because the best consolidation loans are the ones with the lowest interest rates. The lowest interest rates are often only offered to new customers to attract them to the business. This means that to get the best loan to consolidate your debt, you should look for a new lender every two years. This will allow you to place your debts at the best interest rate, lowering the overall price.

Payday loans

Payday loans are loans designed to help you last until your next payday. You don’t need good credit to apply for them, which means they are the perfect option for people in difficult circumstances. For example, if you are nearing the end of your monthly paycheck and your car breaks down, a payday loan can be used to fix the vehicle, and you can pay off the loan with your next check.

However, these loans are expensive due to the fact that they do not check your credit. If you can afford to avoid these loans, you should.

Pawn shops

Pawn shops are another costly one. They work like a secured loan when you bring items like jewelry, games, or a television into a pawnshop. The broker then evaluates the item and loans you between 25% and 65% of the item’s value. You then receive a ticket and must repay this debt within 30 days.

If you don’t pay within 30 days or if you lose your ticket, the broker may sell your item.

Think of it as a mix between a payday loan and a mortgage.