How do you Like your Loan?
When it comes to loans, there are a couple of options. Now, what I am talking about is not say a car loan and a mortgage specifically, rather the two major types of loans most people get.
The first type of loan is an unsecured loan. This type is based purely on your credit score: if your score is good you get the loan, if it is bad, you don’t. Also, the loan repayment period is shorter than the second one I am going to talk about here, with the average being five years. You don’t pledge anything as security on the loan, so if you default on it (don’t make your payments) you won’t lose anything except for points on your credit score.
The second type of loan is a secured homeowner loan. If you are a home owner, you can take advantage of this type of loan. Basically the way it works is you take a second mortgage on your home and the amount available is based on the equity you have in your home. Most people take out this type of loan to renovate their house or do some home improvements. Repayment periods for these loans can be as long as your mortgage - up to 25 years.
Most people will have both types of loans in their lifetimes depending on the stage of your life.
