Understanding the Different Types of Loans

Understanding the Different Types of Loans

Before taking out any loan, you need to understand the different types of loans. As well as how they are structured.

What types of loans are there?

Loans can have a specific purpose or they can be a general one. All loans are subject to Terms & Conditions. T&Cs include details relating to how much the loan is for and what the loan repayment structure is. Specifically, proposed loan T&Cs will also outline what the money is allowed to be used for.

There are 8 loans which You need to know about

1. Payday loan: A short-term cash advance that requires you to borrow against future paychecks.
2. Gold Collateral loan: A loan secured by a gold item, which is kept by the lender until the loan amount is paid back.
3. Pawn shop loan: Short-term loan in exchange for a valuable item which can be redeemed under specific conditions.
4. Personal loan: Which can be used to pay for personal and household requirements.
5. Student loan: Are used to pay for education.
6. Mortgage: Money borrowed to buy a home.
7. Car (Auto) loans: Help you to buy a new or used vehicle.
8. Business loan: Funding specified to help your business get started or make improvements.

How to choose which Type of Loan You need?

Choosing to take a loan requires you to consider the risk of borrowing money and the type of loan you want to take. You also need to look at what types of loans you are eligible for and who will agree to lend you money. Some loans take into account your credit history, blacklisting status and employment record. Another consideration is if you will be required to have someone stand surety for you. This means that if you don’t or can’t make a payment, then they will pay instead. Longer-term loans often require you to take out insurance, such as life insurance.

5 Considerations when choosing the Type of Loan

1. What do you need the loan for?
2. How much do you need?
3. How do you need it paid to you (Lump sum vs instalments)?
4. When are you going to be able to start to pay it back?
5. How are you going to pay it back?

Cost of Loans

In addition to the principle or capital amount of money you borrow, loans have fees and interest costs. Fees are used to cover the administrative cost of your loan. The interest is the cost of borrowing the money. Coughlans assesses your Gold & Gold Jewellery for free. Many loaning institutions will charge an assessment fee of potential collateral items. Find out what fees are payable when you borrow money. They make a difference to the end total of much you will need to pay back. Therefore, how expensive the loan is. Remember, the amount you borrow is less than the amount you will be required to pay back.

Which Short Loans are the least Risky

Short term collateral loans can be less risky than payday loans or ones which do not require collateral. This is because loans, which for example use gold as collateral, are able to have easier and more flexible loan repayment schedules. They also are usually not restrictive in what you can use them for. As they don’t require background, credit or employment checks the process of getting a gold collateral loan can be very quick. For example, at Coughlans an in store application can be processed in as little as 15 minutes and only requires you to have an ID.

Who to take a loan from

You don’t have to borrow money from a bank. However, always loan money from a reputable institution. They should be a registered service provider in terms of the National Credit Regulator (NRC). They should also be fully compliant with the legal requirements of all relevant legislation outlined by the National Credit Act. For example, The Second-hand Goods Act.

Ideally, choose a place to borrow money from that has a longer history of lending money and a good customer redemption rate. Coughlans has a long-standing reputation of using Gold & Gold Jewellery for collateral loans. They have been lending money for over 110 years and have a customer redemption rate of 90%.

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