Loans may be single or installment payment loans. A single payment loan requires that the balance be paid in full at some point in the future, including the principal.
An installment loan allows borrowers to repay over time. An installment loan is in default when a required payment is overdue.
A secured loan gives the lender the right to take certain assets or property in the event the loan is not repaid. A loan not secured by collateral is unsecured.
Types of Consumer Loans 6-4 Rates on student loans tend to be more favorable than on other loans. To be eligible for a student loan you must be a U.S. citizen. Student loan – a loan made for the purposes of education. Lenders typically will limit the loan to a percentage of the current market value of the car. Automobile loan – a loan made for the purpose of buying an auto. It is secured by your home. They are usually installment loans payable over 5 to 15 years. Some of the interest on your loan may be tax deductible depending on your tax bracket. Home Equity Loan - A home equity loan is a loan for the difference between the market value of your home and the remaining balance on your mortgage. Characteristics Type
Most financial institutions offer one or more types of consumer loans. Many websites, such as, www.lendingtree.com and www.bankrate.com ., offer information on rates. For auto loans, try http://finance/yahoo.com/loan .
Depository institutions – These institutions offer the widest variety of consumer loans at the most favorable rates.
Consumer & Sale Finance Companies – Consumers who cannot borrow from a depository institution due to poor credit or insufficient credit, may consider a consumer finance company. The obtain funds from investors and usually charge a high interest rate.
Other Sources of Loans – You can also obtain loans through investment accounts, retirement plans and pawnshops. However, these loans are risky and could jeopardize your financial plan.
Consider the signs of credit trouble, offered by consumer credit expert Greg Pahl, in his book, The Unofficial Guide to Beating Debt. If you answer “yes” to many or most of theses questions, you have a serious credit problem:
Are you spending increasing amounts of your income to pay your bills?
Are you at or over your credit limit?
Do you worry a lot about money?
These are just some of the necessary questions. Take the Quiz in your text and tally your “yes” answers.
Under the new bankruptcy law, most higher-income households are required to opt for Chapter 13 bankruptcy.
Under Chapter 13 bankruptcy, the plan which must be approved by the court, generally includes new payment arrangements with creditors for reduced balances and payments. Under Chapter 13, the debtor can generally keep all of his or her assets.
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