Open-Ended and Closed-Ended Loans
Open-ended loans are loans that you can borrow over and over. Credit cards and lines of credit are the most common types of open-ended loans. With both of these loans, you have a credit limit that you can purchase against. Each time you make a purchase, your available credit decreases.
Secured and Unsecured Loans
Secured loans are loans that rely on an asset as collateral for the loan. In the event of loan default, the lender can take possession of the asset and use it to cover the loan. Interests rates for secured loans may be lower than those for unsecured loans. The asset may need to be appraised before you can borrow a secured loan.
Predatory Loans
Payday loans are short-term loans borrowed using your next paycheck as guarantee for the loan. Payday loans have notoriously high annual percentage rates (APRs) and can be difficult to pay off. If you’re in a financial crunch, seek alternatives before taking out a payday loans.
Source: http://credit.about.com/od/avoidingdebt/a/types-of-loans.htm
Open-ended loans are loans that you can borrow over and over. Credit cards and lines of credit are the most common types of open-ended loans. With both of these loans, you have a credit limit that you can purchase against. Each time you make a purchase, your available credit decreases.
- Home equity line of credit (HELOC) is an example of this type of loan in which the lender agrees to lend an amount, and the collateral is the borrower's equity in their house.
Secured and Unsecured Loans
Secured loans are loans that rely on an asset as collateral for the loan. In the event of loan default, the lender can take possession of the asset and use it to cover the loan. Interests rates for secured loans may be lower than those for unsecured loans. The asset may need to be appraised before you can borrow a secured loan.
- Auto loans are considered secured loans
- Student loans are considered secured loans
- Home mortgages that aren't through the FHA are considered conventional loans
Predatory Loans
Payday loans are short-term loans borrowed using your next paycheck as guarantee for the loan. Payday loans have notoriously high annual percentage rates (APRs) and can be difficult to pay off. If you’re in a financial crunch, seek alternatives before taking out a payday loans.
- Lenders may charge up to 400% APR
- 75% of borrowers are unable to repay their loan within two weeks
- Borrowers may have to take out loan "rollover", which ends up costing more money.
- Payday loans don't allow partial payments like most other loans, it must all be paid back at once.
- 90% of payday industry's revenue comes from making larger loans to the same customers.
Source: http://credit.about.com/od/avoidingdebt/a/types-of-loans.htm