Loans are an important personal financial tool. Most people don’t have the cash on hand to buy a house or new car, for example, so mortgages and auto loans are critical funding mechanisms to help make these things more accessible.

Many loan types exist, and what kind of loan you can get depends on a variety of factors, ranging from your credit score to your income. Discover what kinds of loans there are and the best type of loan for various situations below.

Personal loans

Personal loans are a type of installment loan. You borrow money from a bank or other lender and agree to pay the amount back in installments.

Most personal loans are unsecured. Secured loans involve collateral—property a lender can take and sell to help cover its losses if you don’t pay as agreed. Collateral helps protect the interest of the lender, which means unsecured loans come with a bit more risk for lenders. Because of that, lenders often charge higher interest on personal loans than they do on loans for homes or vehicles

The exact interest you might get on a personal loan and how much you can borrow depend on factors that include:

• Your credit history and score
• Your income and employment status
• The products the lender offers
• How long you want to borrow the money for

What are personal loans for?

You can typically use personal loan funds for whatever purpose you want. Some reasons people take out personal loans include:

• To pay for a large expense, such as a wedding or vacation
• To make a large purchase, such as furniture or a new home appliance
• To consolidate debt
• To cover emergency expenses, such as a car repair or medical bill

How do you find the best personal loan?

The best personal loan for you is one that:

• Provides the funds you need
• You can reasonably pay off as agreed
• You can qualify for

To find personal loan options, you can search online. Start with the Credit.com personal loan marketplace to see numerous options. You can also ask your bank or credit union about personal loan options.  Paragraph content here.

Mortgage loans

Mortgage loans are loans used to purchase real estate, such as a home, land or a commercial property. Mortgages are secured loans, which means the property is used as collateral. If you don’t pay the loan as agreed, the lender can foreclose on the property, selling it to recoup its losses.

How do mortgage loans work?

Mortgage loans are some of the largest loans available to consumers. You usually agree to pay back the amount you borrow over the course of 15 to 30 years. This is a lot of risk for the lender, so the mortgage approval process is more detailed than approval processes for other types of loans.

Your credit score does play a role in whether you can get approved for a mortgage and how much interest you might pay if you do. But other factors are also important, including your income, debt-to-income ratio, credit utilization, cash on hand and types of items on your credit report.

The lender will also want to ensure that the home’s value equals or exceeds the amount you’re borrowing. They may require that you get an appraisal to ensure this fact.

Mortgage loans come in a variety of structures, including fixed-rate mortgages, adjustable-rate mortgages, jumbo loans and government-backed loans like FHA and VA loans. The terms and conditions of the loan, such as the interest rate, length of the loan and the down payment requirements, vary depending on the type of mortgage and the lender’s policies.

How do you get a mortgage loan?

You can get a mortgage loan by going through a broker, applying through your bank or applying online. Whatever path you decide on, take time to research loan options and mortgage rates to get the best possible deal you can.

But before you apply, make sure your personal finances are in order. Your credit score plays a big factor in your approval odds. Different loan options have credit score thresholds you need to meet to qualify. You could qualify for an FHA loan with a credit score of 500, but traditional loans require a score higher than 620. Mortgage lenders look at credit scores from all the bureaus, but they also look at your credit history as a whole. In so doing, they’re looking at any collections, delinquencies, or bankruptcies to determine how confident they are in giving you the loan. If you need a good idea of where your credit stands, you can use Credit.com’s free credit report card, updated every 14 days. Take note of any outstanding debts and make a plan to pay them off, and dispute any inaccurate information. Address these problems and keep monitoring your credit during the mortgage loan process to ensure everything goes accordingly.

Apart from your credit scores, your lender will look at your take-home pay. Your gross income and debts will determine your debt-to-income ratio, which also affects your approval odds. Ideally, lenders prefer a debt-to-income ratio of 36% or less, with 28% of it going toward your mortgage payment. Some lenders may go

To buy a home, you need a down payment. Naturally, the higher the down payment, the lower your monthly costs will be. If you have limited funds for a down payment, ask your preferred lender about any other loan options that are either low or no payment loans. These can include FHA or VA loans, which can help you buy a home with less out of pocket costs. Keep in mind that with these loans, monthly costs can be more expensive. Most of these loans require mortgage insurance, which increases your monthly payments, and protects the lender in the event of a mortgage default. And if you want to refinance, inquire about affordable options.

Lastly, there are closing costs you need to consider. These can include any lender fees, appraisal fees, insurance costs, and so on. Keep room for these within your budget, as well.  Buying a home takes a lot of effort and cash flow to secure it. But with proper preparation and the right loan options, you can buy your forever home faster.

Auto Loans

An auto loan is used to purchase a new or used vehicle. These are secured loans, and if you don’t pay the loan, the lender can repossess the vehicle and sell it to cover its losses.

Your credit, income and other debt all play a role in whether you can get an auto loan. These factors also help determine the interest rate you might be offered for a car loan. The higher your interest rate, the more expensive your loan is.

Why is financing a car a good idea?

Considering the costs of buying a car, many buyers opt to finance their new vehicle. So, when you decide to finance a car, you first need to think about any and all costs. Of course, these costs can vary. Therefore, it’s important to shop around and look for practical ways to save money on your car purchase, not just upfront costs, but also over time. While financing a car is a more viable option for many, the best way to save money is to purchase a car in cash outright. But, since this isn’t applicable for many, financing is the next best step. What does this mean for you? Buying a car is a big financial decision, so you need to take some essential steps to make sure you purchase a car well, and that its costs fit within your finances.

One of the first things when deciding to finance a car is the total purchase price. This includes the car’s price plus any additional features that need financing. Other fees and/or add-ons vary by state, and could include warranty coverage, taxes, and extra vehicle options.

Apart from purchase, interest rate or APR, also affects how much you pay. Naturally, the higher the rate, the more you pay. So, it’s important to shop around for good deals on APR, considering you’ll end up paying more than the car is worth. The same applies to loan terms. Most people look to own a car for at least five years. The upside is your monthly payments will be lower. The downside is that you end up owing more than the vehicle’s worth

With all that in mind, if you’re still considering financing a car, here’s how to find the best loan for you.

How do you get an auto loan?

Many people apply for vehicle financing at the dealership when they’re ready to purchase a car. The benefit of this method is that the dealer’s finance office helps you with the paperwork and checks with numerous lenders to try to get you the best deal in the moment.

However, you may be able to get a better deal if you do your own research and apply online or with your bank for an auto loan. If you go into the dealership pre-approved for a loan, you may be more confident when negotiating the vehicle purchase.

Start your research into different lenders, comparing rates and terms to find what’s best for you. Avoid applying too many times in quick succession, as these hard inquiries can bring down your credit score. Another factor that can help bring down costs is a down payment. An average down payment can be anywhere between 10-20% of the car’s value.

When looking for auto loans, especially online, make sure you’re borrowing from a trusted lender and keep your sensitive information safe.

Whether you’re looking for a new car or want to refinance for lower monthly payments, make sure you understand your qualifications and try to create a stronger application. This way, you can save more on your vehicle. Look at the options you have, and do your due diligence to ensure you’re getting the best auto loan for your needs.

Student loans

Student loans help cover the cost of college. You can get private or government-backed student loans.

All types of student loans are installment loans. You usually end up paying them back in monthly installments. However, many student loan repayments don’t start until you’re out of school because the lenders understand that students may not have the funds until they start their careers.

Often, student loan lenders have numerous programs to help keep payments affordable. You may be able to set up new payment plans or defer your loans if they cause you financial duress.

Do you need student loans?

The average cost of tuition for public 4-year colleges in 2022 was $10,740 to $27,560. That doesn’t include room and board, which can be around $12,000, and other expenses. To many, that’s a large expense, and you may not have the cash on hand to pay for your education. In fact, the total student loan debt;in the United States has reached $1.7 trillion in 2022, taking up a large portion of debt owed, in addition to mortgages, credit cards, car loans, etc.

Even so, student loans can help foot the large bill you’re likely to have when getting a higher education. To get started, it’s important to know what student loan options you have to help cover everything.  If you can’t easily cover these costs with savings or other income, you may need a student loan.

One important distinction to make is between federal and private student loans. Most people opt for federal student loans provided by the government as they provide lower interest rates. However, federal aid can sometimes not cover all expenses. So, private student loans are another option to help finance your education. Federal student loans, as stated before, are loans provided by the government, which have certain protections, such as deferment, to help students in times of economic hardship. These loans can come either subsidized or unsubsidized. The major difference between the two is that with subsidized loans, you have to show financial need, contrary to unsubsidized, which do not have these requirements. While most opt for federal loans, they may not help cover all expenses. This is where private student loans can help. Of course, look at your options to see what works best for you.

Most student loans don’t require repayment until after graduation, so you have some time to be prepared and tackle your student loans with a viable action plan.

Where do I find student loans?

The average cost of tuition for public 4-year colleges in 2022 was $10,740 to $27,560. That doesn’t include room and board, which can be around $12,000, and other expenses. To many, that’s a large expense, and you may not have the cash on hand to pay for your education. In fact, the total student loan debt in the United States has reached $1.7 trillion in 2022, taking up a large portion of debt owed, in addition to mortgages, credit cards, car loans, etc.

Even so, student loans can help foot the large bill you’re likely to have when getting a higher education. To get started, it’s important to know what student loan options you have to help cover everything.  If you can’t easily cover these costs with savings or other income, you may need a student loan.

One important distinction to make is between federal and private student loans. Most people opt for federal student loans provided by the government as they provide lower interest rates. However, federal aid can sometimes not cover all expenses. So, private student loans are another option to help finance your education. Federal student loans, as stated before, are loans provided by the government, which have certain protections, such as deferment, to help students in times of economic hardship. These loans can come either subsidized or unsubsidized. The major difference between the two is that with subsidized loans, you have to show financial need, contrary to unsubsidized, which do not have these requirements. While most opt for federal loans, they may not help cover all expenses. This is where private student loans can help. Of course, look at your options to see what works best for you.

Most student loans don’t require repayment until after graduation, so you have some time to be prepared and tackle your student loans with a viable action plan.

Where do I find student loans?

To find out about government-backed student loans you might qualify for, complete the Free Application for Federal Student Aid (FAFSA). You’ll have to fill out the FAFSA with all your information, including: household income (includes your parents’), tax returns (your parents if you’re dependent), and the school you wish to attend. Once your application is processed, the school in question will send you a financial aid package, in which you can choose from different options, as well as any other applicable grants, loans, or other types of aid.

If you don’t qualify for government-backed loans or would prefer private loans, you can find private student loans online. The process is relatively easy. You can compare different lenders online, usually, without affecting your credit. If you need help finding a student loan right for you, Credit.com can help. Use our student loan calculator tool to get matched with a lender that meets your qualifications.

Of course, look at your options to see what works best for you. When it comes to student loans, it’s best to be prepared and understand the terms and conditions of what you’re agreeing to. And when the time comes to repay, make sure you have a sturdy budgeting plan in place to ensure you can make payments on time and bring down your debt.

Small business loans

Small business loans provide small businesses with the funding they need to cover daily expenses, buy necessary equipment or invest in growth. Lenders may consider the personal credit of the small business owner as well as the business’s creditworthiness and financial health when approving loans and setting terms. In many cases, small business loans are set up as installment loans, with the business paying the amount back in monthly installments.

What are the advantages of a small business loan?

Sometimes, small businesses struggle to stay afloat. Financing a business can be tricky, and if you don’t have the capital to operate over a long period of time, you may be forced to shut down. This happens to many businesses within the first two years, at least 20% of them. So, what can be done to remedy the situation? Small business loans offer a lifeline to small business owners that need extra money to thrive.

Conversely, you might be looking to expand, renovate, or sustain your current business. You can use a small business loan for this, as well. You can direct the funds toward business-related expenses, like machinery, real estate purchases, staffing, renovations, and more.

What kind of small business loan can I get?

How do these loans work, though? Small business loans come in many different forms and from different sources, so it’s worth looking at all your options before proceeding. Banks and credit unions are a popular source of these loans, as well as business credit cards and CDFIs, which are given to small business owners in underserved communities. SBA loans are also available, and these are backed by the government and provided by private lenders. These loans, because they’re backed by the SBA, have different terms. If you default on this loan, the government pays the lender the guaranteed loan amount. However, these loans have more stringent requirements, like a good credit, strong finances, and a few years in business.

Where can I get a small business loan?

Contrary to other personal loans, getting a small business loan can be a much more rigid process. Before you apply, you need to have a good understanding of both your business finances and personal history.

Lenders will have different requirements for loans. But, you still need to come in with as much information about your business as possible. To increase your chances of getting approved for a small business loan, you need to craft a strong application with a detailed history of the following:Paragraph content here.

• Credit Score
• Revenue
• Cash Flow
• Collateral
• DTI Ratio
• Industry
• Age of Business
• Plans for the Loan

If you’re a new business, less than a year old, you might have a harder time securing funding, as lenders often look for established cash flow during the application process. So, if you’re trying to get startup funding, your credit profile plays a bigger role. While you need to provide all the pertinent business information as stated above, one item needs more attention as a new business owner, and that’s your credit score. For newer businesses, lenders are more than likely to check personal credit scores. So, use our credit report card to get a comprehensive view of your credit report, and get graded on areas of improvement.

Lastly, you can get a credit card to help pay for business expenses. With these cards, you can help finance your business using revolving credit and flexible payment options. And with no collateral, you can keep your business assets secure. As long as you make on-time payments and spend responsibly, you can both keep your business operation and your credit score healthy.

If you want a small business loan, understand what lenders require, know where your personal finances stand, and you can have a better chance at getting the funds you need.