This is the most common type of open-ended loan. What this means is that you have a credit limit and each time you buy with it, the credit available to you decreases. As you pay it off, your credit increases. Credit cards are accepted by many retailers as a form of payment and are often more convenient for consumers instead of carrying cash. Another factor that makes credit cards quite popular is that they can be helpful when unexpected financial emergencies arise. Repayment plans can be arranged with the lending institution.
Secured Loans:
These are loans that are provided to individuals in exchange for an asset that is provided as surety. Secured loans rely on an asset as collateral for the loan. If the borrower defaults on payment, the lender can take possession of the asset. Interest rates on these loans are generally lower.
Unsecured Loans:
No assets are required for this type of loan. They are generally more difficult to qualify for and have higher interest rates. Lenders who grant these loans usually rely on the applicant’s credit history and income in order to assess affordability. Many micro lending institutions specialise in the provision of this type of loan. In South Africa, unsecured loans are also becoming more popular.
Mortgage Loans:
These loans are used to buy real estate. Individuals who apply for these loans are usually seeking help with buying their homes. Interest rates are usually charged based on the prime interest rate.
Personal Loans:
These loans may be short-term or long-term loans. They are offered by most banks and can be used to finance any type of expense. Approvals are generally granted within 24 hours or within a few days. Interest rates vary and may be charged depending on individual affordability and credit standing.
Business Loans:
These loans are usually extended to business owners in order to fund new or existing businesses. A viable business plan is usually a prerequisite for application. Repayment terms may range from 5 to 25 years.
