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What is Loans and Types of Loans

  • What is Loans and Type of Loans


    Loan in simple words can be described as a type of debt which is usually taken in need of hour and is to be returned in a specific period. Generally a specific rate of interest is chargeable on the loans and has to be paid along with the principle amount which has been taken as a loan.


    There are various kinds of loans and one should set the priorities right before going in for a loan.


    Types of Loans


    Open and Close Ended Loans


    Open ended loans can essentially be categorized as the loans in which borrowing can be done repeatedly. Credit Cards are a perfect example of open ended loans. A credit limit has been set in case of credit cards and each time a purchase is made the credit decreases. As the payments are made, the credit increases and the loaning cycle goes on endlessly.


    Close Ended Loans on the other hand are loans in which no borrowing is allowed once the loan amount has been paid. Students loans, auto and mortgage loans are perfect examples of close ended loans.


    Secured Loans


    Loans in which the lender can take possession of assets in case the amount is not paid on time come under the category of secured loans.


    Unsecured Loans


    A distinct drawback on an unsecured loan is that these have higher rate of interest. However, the credit history of the borrower is the sole criterion for awarding of any unsecured loans. In case of any default while paying the loan amount, the lender has to file a lawsuit to recover the loan.


    Loans one should avoid taking


    Payday Loans


    These are short term loans which use your upcoming paycheque as a guarantee. Very high rate of interest is a distinct disadvantage of this loan and one should explore all options before relying on any such option.


    Advance Free Loans


    These loans should be avoided at any cost. In these kinds of loans, the lenders ask for some prior deposits while offering advance free loans. When the requested amount has been deposited in account of the lender, they simply refuse to lend you the loan amount and disappear.


    Other Loans


    Guaranteed Loan


    A loan is provided on Guarantee of one party to assume the debt of a borrower if that borrower defaults. A Guaranteed loan can be limited or unlimited according to the agreement.



  • samrat
    samrat Nice Post Nagendra
    January 24, 2014
  • jasshan
    jasshan Very useful information Nagendra. I Like your post.
    January 24, 2014
  • Paul Verhoven
    Paul Verhoven I need a loan, but the Bank won't give me any money. I don't know what to do.
    December 10, 2018
  • Popo Rich
    Popo Rich Probably the best solution for you is to contact the site . Here you will definitely get the required amount without hidden conditions and with a low interest rate. I think this is the best solution out of all the quick loans I've tried to get.
    December 10, 2018

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