Almost everyone has some form of loan out with a bank, some other financial institution, a private lender. There are over 7,000 FDIC-insured commercial banks in the United States and Wells Fargo alone has a loan portfolio of almost $825 billion in 2014 and that is just one bank. Naturally, one can only imagine the different types of loans available.
The 4 Major
Different Types of Loans
There are four basic categories from auto loans, home loans, education loans, and personal or small business loans.
1)Auto Loans
Americans borrowed an all time high of $1 trillion to finance their cars at the end of 2015, according to CNN. Based on a 5-year, fixed-rate loan for a $25,000 new car with 20% downpayment, you require a $20,000 loan. Based on a simple interest rate of 2.79% (based on Bank of America auto loan rate), your loan payment is $358 monthly for 60 months.
- Generally, the smaller the car loan interest rates, the cheaper the loan is. Most automobile dealerships offer financing for car loans through participating lenders. You will need to meet certain requirements in order to qualify for a loan. Loan options for those who have poor credit ratings varies.
- Average Auto Loan Rate in USA is 4.29%
The Auto loans interest rates for the last 60 months (July 2015 to Sep 2017) for in USA is 4.29%. The interest rate for a 5 year auto loan 4.51%. The average auto loan taken is $30,621.
- Bank of America Auto Loan Rates
New car (Dealer) - 2.79% APR
Used car (Dealer)Footnote - 3.09% APR
Refinance - 3.09% APR
2) Education loans
Education loans include those for students who have attended college right out of high school as well as adults who have taken classes to further the career educational levels.
In 2015/16, subsidized Stafford Loans accounted for 22 percent of all loans paid out to students in the United States. A Stafford Loan is a student loan offered to eligible students enrolled in accredited American institutions of higher education to help finance their education. The Higher Education Act of 1965 guarantees repayment to the lender if a student defaults.
- A total of $46.5 billion U.S. dollars was offered to students across the United States in the form of loans (In 1996/97). By 2016/17, this amount had ballooned to 106.7 billion US dollars.
For most students, scholarships, grants and federal aid are the best options for funding higher education. However, some students take a further private student laon to cover the gap between what they received and their actual cost of attending school.
- Private student loan peaked at $18.1 billion for the 2007-08. Currently private student loan hovers around $7.8 billion for 2014-15.
- Private student loans typically carry higher interest rates and fewer flexible repayment options, which is why they should generally be a last resort when it comes to funding higher education.Top private student lenders.
- Top 5 private student loan lenders
- 1) SunTrust Bank. Repayment terms. Seven, 10 or 15 years
- 2) Discover
- 3) Wells Fargo
- 4) College Ave Student Loans
- 5) Sallie Mae
3) Home Loans
For anyone who has the dream of owning a home, a home loan or mortgage loan is a means of fulfilling that dream. Like other types of loans, you will have to fit certain qualifications or meet specific requirements that are established by the lender to receive a loan for a house. Since this is such a long-term expense, you will need to pay close attention to what sort expenses you will need, how much your payment will be, etc. Now, if you already have a home, but you need to get another loan, you can actually obtain a mortgage loan on your house. In either case, you need to take the time to research all of the home loan options out there to be sure you will get a fair deal from a lender.
4) Personal Loans
The final category of loans includes those that are obtained from banks or credit unions on a personal basis or for small business purposes. These two purposes often blend together; you may want a personal loan to pay off overhead expenses in a new job venture or you may want to develop a new business from the ground up and need start-up capital. A personal loan may simply be a loan to pay down your debts and can serve as a form of debt consolidation.
There you have it. The four different types of loans. As mentioned above, this overview provides at least a slightly clearer picture of the loan realm. Yet, if you investigate, you will soon find that there are many nuances and other subgroups of loan types that add to the complexity of the subject.
