While all loans have the same basic idea – borrow now, pay later – there are key distinctions between the most common types of loans. Understanding the difference between a personal loan, a mortgage, debt consolidation and so on can help you decide what loan you should get, and when.
Visit HUECU for a variety of loan options with straightforward terms and competitive rates: https://huecu.org/other-loans/.
Most Common Loan Types
- Personal Loans
- Mortgages Loans
- Other Home Loans
- Student Loans
- Credit Cards
- Cash Advance
- Debt Consolidation Loans
- Auto Loans
Personal Loans
Some loans are only available to fund certain kind of purchases, like a home or auto loan. A personal loan, however, is the most flexible. It can be used for any number of purposes, including paying utility bills or throwing a wedding.
Interest rates on personal loans tend to be high, because unlike a car or home loan, there’s no collateral securing your debt. However, since COVID-19 some financial institutions are offering special rates on personal loans to assist people affected by the pandemic. HUECU for example lowered its already competitive interest rate so that members who qualify can get a personal loan with 4.99% APR for 60 months.
Mortgage Loans
Mortgages are an extremely important and popular type of loan. With a mortgage, you can pay for your home over time, rather than entirely up front – which would be a prohibitively large expenditure for most families.
Borrowers can choose a fixed-rate mortgage or an adjustable rate mortgage. A fixed-rate mortgage means your interest rate stays the same for the life of the loan, with consistent monthly payments. An adjustable rate mortgage’s interest rate fluctuates after a set period of time, depending on market conditions, and is sometimes a better choice for home buyers who don’t plan to own the house for a long period of time.
Other Home Loans
Homeowners can tap into the equity of their house to access low-cost funds for a variety of needs. Home equity loans are a great choice to pay for home improvements, but can also be used to cover anything from medical bills to a summer vacation. The interest rate on a home equity loan is often lower than what you’d pay with a credit card or a personal loan, as the money you borrow is secured by your home. It’s also possible to apply for a home equity line of credit, which provides access to funds as needed rather than as one lump sum.
Student Loans
From tuition to textbooks to housing, student loans help hundreds of thousands of pupils attend college and graduate school every year. Loans may be supplied by private companies, or the federal government. While lenders do not closely monitor where student loans are spent, their purpose is to cover any cost related to school. Why not just get a personal loan? Because student loans typically have a far lower interest rate and better terms – such as possible loan forgiveness after a certain number of years working at a not-for-profit organization or a low-income school.
HUECU offers competitive rates on a variety of education loans, including loans for parents and student loan refinancing, which can potentially lower your monthly payments.
Credit Cards
Every time you spend money with a credit card, you’re basically taking out a loan and promising to pay it back. Credit cards are a great choice for small, everyday expenses, and sometimes offer additional benefits. The HUECU Platinum Rewards+ Card, for example, offers qualifying cardholders 1.5% cash back on everything, a new card activation bonus of 10,000 points, and 0% APR for 12 months.
Cash Advance
Credit cards sometimes include a cash advance feature, which represents another type of loan. However, be aware that cash advance is an expensive way to borrow money. You could be looking at an interest rate above 25%, which compounds alongside your usual credit card balance, plus an additional fee that’s usually around 2-3% of the total money borrowed.
Debt Consolidation Loans
When you’re paying back a number of loans to different creditors, it can be overwhelming to keep track of everything. A debt consolidation loan enables you to group multiple debts into a new loan, and make a single monthly payment. It may be possible to lower your interest rate or change your payback terms via this new loan – but it won’t reduce the principal amount of money you owe. Performing a credit card balance transfer is another method of consolidating debt and potentially giving you a better interest rate. Debt consolidation loans and credit card balance transfers can be particularly useful if your financial situation has changed since you first borrowed money, and you now qualify for better terms.
Auto Loans
If you’re looking to buy a car, you could take out a personal loan to help cover the cost – but a purpose-designed auto loan is probably your best option. Auto loans typically provide a better interest rate than a personal loan and may include additional benefits, like the HUECU Green Auto Loan that offers a 0.25% rate discount if you purchase a hybrid or electric vehicle. If you already have an auto loan but you’re not happy with the conditions, HUECU has refinancing options that could lower your interest rate.
