Loan Literacy: Do You Know What You’re Doing?

mortgage loanFor first-time loaners, borrowing money from lending companies can be nerve-wracking. Not only is it embarrassing to admit to lack of funds, it is also terrifying if you don’t know what you’re doing. Misinformation and lack of awareness will inevitably make your first-time lending experience a bad one.

Everybody will reach this point some time. No matter how much you are making or not making, you have to learn how to handle money. Some begin young, others don’t and face the horror of figuring out the ins and outs of financial management and loan processes only later in life. Start your loan literacy now and make informed decisions afterwards.

What is a loan?

A loan is a debt provided by an organization or an entity to an individual or a group of individual. It comes with an interest rate and is evidenced by a note, which specifies the amount, interest rate, and date of repayment. It is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan.

What are the types of loans?

There is a wide array of loan types and variations. Some companies modify their loan packages as they see fit for their target clients, as evidenced by citycreekmortgage.com, a Utah-based lending firm that offers personalized loan packages.

Here are the usual types of loans a first-time borrower should know about:

• A secured loan is a loan in which the borrower pledges a specific asset, like a car or a property, as collateral.

• A mortgage loan is a very common type of debt instrument, used by many to purchase housing. In this setting, the money is used to buy the property.

Unsecured loans, on the other hand, come in the form of monetary and are not secured against the borrower’s assets. These come in different marketing packages, like credit card debt, personal loans, peer-to-peer lending and others.

Which loan is for me?

Every situation is different. For young individuals needing help out of a sticky financial situation, the most flexible type they can secure are personal loans, which are unsecured installment loans. It comes in a variety of arrangements the client, together with a trusted financial firm, can modify and tweak to fit a unique situation.

Start-up loans, meanwhile, is ideal for young entrepreneurs going forward or young professionals who wish to make smart financial choices for the future.

The secret to successfully securing a loan and saving yourself from any financial drought is awareness and making informed decisions. Find your ideal financial tool to help you build your best possible future.