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Before you use a personal loan calculator to determine your monthly payment for a loan, it’s always best to know what type of loan you need first. Knowing this can help you save so much on interest and long payment terms. A personal loan calculator generally only works for unsecured loans, as that’s what a personal loan is.

Here are the different types of loans you find today. Once you’ve determined that you need an unsecured loan, use the personal loan calculator.

Types of Loans

Loan types differ so much because each loan has a specific intended use. They are different based on the length of time to pay it off, the interest is calculated, when payments are due and by some other factors.

Student Loans

Student loans are offered to university or college students to help their families cover the cost of higher education. There are two main types: Government grants and private student loans.

A Government grant is an award of funds from the government that does not need to be repaid, does not accrue interest, and has strict guidelines for application. Grants are tied in with key deliverables like black economic empowerment, job creation and developing the economy, just to name some.

Private student loans come from a bank for example, where it does accumulate interest but the student can pay of the interest every month until such time as they start working. Then they pay the amount in full.

Home Loans
Home loans are loans given by home loan providers like FNB Home Loans, this allows the buyer to buy a home that can’t be payed for upfront. The home loan is tied to your home, meaning you risk foreclosure should you fall behind with payments. They do however have some of the lowest interest rates of all loans. These are secured loans as an asset is fixed to the loan.

Motor Vehicle Finance
Like with home loans, these loans are tied to your vehicle. They can help you afford a vehicle but you risk losing the vehicle should you miss a payment. This type of loan is usually given by a bank and sometimes the dealership. Should you deal with a dealership, it can cost you more in the long run as they charge more interest that a bank generally would. These are secured loans as an asset is fixed to the loan.

Personal Loans
Personal loans can be used for any personal expenses and don’t have a designated purpose. This makes them an attractive option for people with outstanding debts, such as credit card debt, who want to reduce their interest rates by transferring balances. Like other loans, personal loan terms depend on your credit history.
Personal loans are thus un-secured loans. That means, because there is no asset attached to this loan, the loan has more interest. Luckily, the better your credit history is the more likely you’ll get a personal loan and the less interest will be charged. The Personal Loan Calculator is perfect for a loan like this.

 

Small Business Loans

Small business loans are granted to entrepreneurs and aspiring entrepreneurs to help them start or expand a business. As can be expected, this helps you to either bring a business up from scratch or build on an already existing business to help it grow.

Payday Loans

Payday loans are short-term, high-interest loans designed to bridge the gap from one paycheck to the next, used mostly by repeat borrowers living paycheck to paycheck. The longer you don’t pay back a payday loan, the worse the interest gets.

Borrowing from Retirement or Life Insurance

Those with retirement funds or life insurance plans may be eligible to borrow from their accounts. This option has the benefit that you are borrowing from yourself, making repayment much easier and less stressful. However, in some cases, failing to repay such a loan can result in severe tax consequences.

 

Consolidated Loans

A consolidated loan is meant to simplify your finances. Simply put, a consolidate loan pays off all or several of your outstanding debts, particularly credit card debt. That means, fewer monthly payments and lower interest rates. Consolidated loans are typically in the form of second mortgages or personal loans.

 

Borrowing from Friends and Family

Borrowing money from friends and relatives is an informal type of loan. This isn’t always a good option, as it may strain a relationship. To protect both parties, it’s a good idea to sign a basic contract to keep both parties happy and safe.

 

Cash Advances

A cash advance is a short-term loan against your credit card. Instead of using the credit card to make a purchase or pay for a service, you bring it to a bank or ATM and receive cash to be used for whatever purpose you need. Cash advances are also available by writing a check to payday lenders.

 

Home Equity Loans

If you have equity in your home – the house is worth more than you owe on it – you can use that equity to help pay for big projects. Home equity loans are good for renovating the house, consolidating credit card debt, paying off student loans and many other worthwhile projects.

Whenever you decide to borrow money, whether it is to pay the bills or buy a luxury item, make sure you understand the agreement fully. Know what type of loan you’re receiving and whether it is tied to any of your belongings.
Also, familiarize yourself with your repayment terms: what’s your monthly obligation, how long you have to repay the loan and the consequences of missing a payment. If any part of the agreement is unclear to you, don’t hesitate to ask for clarifications or adjustments.