There are a lot of different credits out there. They all vary in different terms, ranging from simple notes between friends and family members, to more complex loans like paying off a house, student loans or an established business. Regardless of what kind of loan it is, every credit needs to be paid, and all conditions of payment are authorized by state and federal guidelines to protect the consumers from unfair practices like too high interest rates.
There are two most well-known types of consumer credit.
The first type is open-end credit which is also known as revolving credit. This kind of loan needs to be paid every month. The best example of revolving credits would be credit card accounts.
Closed-end credit loans, however, are a different matter. They are the types of loan that provides a fixed amount of cash flow to fund a certain purpose for a specific amount of time.
Examples of closed-end credits involve mortgages and car loans.
Different kinds of Loans
Speaking of loans, it is about time we talked about the different kinds of loans. Each type of loan is different and each one of them is determined for individual purposes. The loans differ and vary by how long the length of time is, and according to the interest rate.
The different kinds of loans are as follows:
Student loans are, just as the name obviously points out, loans offered to college students and their families in order to help them pay off the cost of any higher education. Student loans are separated into different categories. The first type is offered by the government and those who are offered by private lenders. Mortgages
The second kind of loan is associated with mortgages. Mortgages are a type of loan that is distributed by banks to allow consumers to buy a house even if they can’t pay it upfront. Remember that your mortgage is tied to your house which means that if you do not pay it off in time, you risk having your house for foreclosure.
Car Title loans
Just like the way mortgage loans work, car loans are tied to your property. Basically, if you do not manage to pay off your car, you risk losing it.
Small business loans
The fourth type of loan is the small business loan. Just as the name labels it, small business loans are granted to clients that are planning to expand their small business.