What are some different types of loans?


Quick Answer

Types of loans include personal loans, cash advances and small business loans, according to Investopedia. Other types of loans are home equity loans, credit cards and home equity line of credit loans.

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Full Answer

Personal loans help in any situation, including paying domestic bills, claims Investopedia. In most cases, lenders of personal loans require an applicant to provide a proof for income or ownership of assets with value equal or exceeding the loan he intends to borrow. Typically, personal loans take a short period of time to be approved or denied following application. However, lenders of personal loans may charge relatively high interest rates, usually 10 to 12 percent. Additionally, personal loans may not be suitable for applicants who intend to start long-term investments, as the repayment period may be relatively short.

Cash advances are instant loans that credit card companies lend on a short-term basis, explains Investopedia. Aside from credit card companies, some institutions, including organizations that prepare taxes, can also grant cash advances. Although applying for cash advances is an easy and fast process, the lending institutions may charge relatively exorbitant application fees and interest rates. The loan amount is also relatively small.

Small business loans are loans that financial institutions, such as the Small Business Administration, grant to potential entrepreneurs, states Investopedia. To obtain this loan, an applicant must present a business plan to the lending institution, which assesses the plan and approves or rejects it depending on the plan's viability. The institutions also require the applicant to provide collateral to cater for the loan if the business project does not work.

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