Before we discuss the loan payment calculator, lets discuss the different types of loans available in the USA.
Different types of loans
Money is something everyone always needs. It is not however possible to pay hard cash for some things like higher studies, to buy a home or car or in emergency situations like a wedding or to pay for expensive medication. In such cases, a better option is to take a loan.
There are various loans you can get for meeting different financial needs. While financial institutions and banks are the best places to get a loan, it is possible to get payday advance loans online. Here is a list of the various loans available, and their brief descriptions to use as reference in a loan payment calculator.
- Home loans
Home loans are also called mortgages, and are used for buying a home. These loans are usually for large sums of money and are by default, secured against your home. So if you fail to repay your loan, the financial institution has the right to repossess your home. A loan payment calculator might be available for home loans.
Home loans generally require a 5-20% deposit sum, and have a longer term than other loans. First time home buyers should preferably get a home loan offering lower interest rates with a longer repayment schedule.
Home equity loans are another type of home loan where you pledge your home’s equity value as security against the loan amount. This loan amount has to be repaid within a specified time and, its interest paid is tax deductible. This also should be available in the loan payment calculator you choose.
A home improvement loan is a loan used for making home improvements. It is a low interest loan where you can borrow between 5 to 80 thousand dollars and repay the amount through low, monthly installments.
- Car or Auto Loans
Car loans can be used to buy any car and are divided into new car loans for buying new cars and car refinance loans.
a) New car loans span for 5-7 years and its interest rate depends on the model and make of the car. The newer the model, the higher the interest rate. Some car dealerships have associations with banks and offer low introductory rates for their customers. A car loan needs a specific loan payment calculator.
b) Car refinance loans helps lower your monthly payment towards your car loan.
c) The lease buy-out loan is the best loan if you wish to buy the car when its car lease terminates. As you’d have paid a considerable amount towards your lease payment, this loan amount is generally low.
- Student Loans
Student loans are available to students going to college, a trade school or for those getting diplomas in specialized fields. These loans are available from government and private sector lenders and should be chosen based your financial and study needs.
There are various government student loans available which offer lower than average interest rate. In case of subsidized government loans, the government pays the interest while the student studies while in unsubsidized government loans, the student has to pay back the loan interest amount. The parent or student however has the option of deferring payments till graduation in both cases.
Financial need helps obtain a government student loan where the degree pursued determines the type of loan available. This is why parents and students have to fill out the Free Application For Federal Student Aid to be considered for any of these federal loans.
a) In case of the popular Federal Stafford loans, the government provides loans to students pursuing a 2-4 year degree and is available at the institution the student plans to study. This loan offers a low, fixed rate of interest and its borrowing limits can be increased based on the degree and the number of years the student is in school.
b) The Parent Plus loan is offered to parents of students and is credit based. The parent can borrow a maximum of the student’s full tuition fees.
c) The Graduate Plus loan is similar to this loan; only difference is that it is unsubsidized and it is the student who is the borrower.
d) Students with a severe financial need should get the Federal Perkins loan. This is a low interest loan that is awarded to a student of each college campus. As this is a first come, first serve loan, students have to make an early application for the loan on campus.
Students who don’t qualify for federal loans can get private student loans at low interest rates from banks and loan companies. Student loans also need a specific type of loan payment calculator.
- Personal Loans
Personal loans are loans people get to meet personal needs like holidaying, to pay for a wedding or honeymoon or for cosmetic surgery. These loans generally charge a high interest rate as they are tailor made for one’s personal needs.
- Secured loans
These are loans that are secured against an asset, like your home or jewelry which is called collateral. As these loans are secured, they are low risk loans to the lender and is why its interest rates are lower than unsecured loans and the amount you borrow is often higher.
These loans can also be repaid over a longer term. The only drawback of this loan is that if you fail to maintain your payments, your creditors can possess the collateral and pay it off to reclaim their money.
- Unsecured loans
These loans don’t have any collateral placed against it and is a low risk loan to the borrower as they don’t risk losing anything if they are late in payments. However these loans are usually small amounts, have a higher interest rate and is for a short period.
In case you fail in making payments, lenders can have the loan terms changed to a secured loan or get court judgments that force the borrower to choose between repaying the money or facing bankruptcy.
- Debt consolidation loans
These loans are used for consolidating various debts into a single loan. This money is generally paid to the borrower’s creditors and not to the borrower. However the borrower has to repay the loan to the new lender. These loans prove beneficial to those in debt as it is usually spread over a longer time period and has reduced interest rates.
- Business loans
Business or commercial loans are given to businesses that require finance for their business. These loans differ based on the purpose of the loan and its collateral. A loan payment calculator fits best for this category of loans.
a) Working capital loans is given to businesses to complete transactions and cover their expenses till they generate sufficient revenue to pay for their expenses.
b) Construction loans are used for building new structures on existing properties or for making modifications to existing buildings.
c) Equipment loans are given to businesses that require huge amounts of money to finance assets used as equipment. The asset used here is used as loan collateral and includes cars and factory machines.
d) Interim loans are short term loans that are designed to help businesses surpass a slow growth phase or when in economic problems. The loan has to be quickly repaid once the business is successful.
e) Commercial mortgage loans are loans given to businesses to buy property for expansion purposes.
f) Development loans are similar to these loans but are used to develop property by not only constructing buildings, but by clearing forests, installing water and gas systems and for draining swamps.
g) Hard money loans are small commercial loans private lenders provide when the business finds it difficult getting money from large lenders. Property and equipment is used as assets for these loans.
- Cash loans
Cash loans or payday loans range from $100 to $1500 and is given to people who are short of funds in an emergency. These loans are repaid to the lender on your next payday, but can be regenerated till subsequent paydays. While these loans are helpful in emergencies, they are rather expensive, especially if you fall back in making payments. There is a unique loan payment calculator for this category.
- Credit cards
Not many people realize that use of credit cards is a sort of loan to them. they are used for paying for things when you don’t have sufficient money to pay for it. The interest rates of these credit cards are rather high and if you miss your monthly payments, it can leave a stain on your credit report.
Points to consider
To get any loan, you need to be employed and have a bank account with a check book. Basically, your credit, age and monthly income plays a great part in determining the amount you can borrow and the loan interest rates. People with poor employment are generally given a smaller loan with higher interest rates than those with good employment.
Whichever loan you need for your financial needs, it is important that you compare the rates of various banks and financial institutions, and thoroughly read the loan papers before finalizing your deal and signing on the dotted line. It is very important to choose the right loan payment calculator for each type of loan.