Loans come in all forms and with different terms, from a simple contract between family members, friends, neighbors, or co-workers, to more complex loan contracts like auto, mortgage, student loans, or payday. Credit unions, banks, lending institutions, and people who lend money for important and necessary items like cars, housing, or student loans are also part of this industry.
Other loan contracts like business loans (whether for small businesses or large companies), as well as loans from the Department of Veterans Affairs, is also available for certain groups or people. Regardless of the type, each credit, as well as its repayment conditions, is monitored by the federal and state guidelines to protect the public from fraudulent practices like unfair interest rates.
Not only that, default terms and the length of the loan should be detailed in the contract clearly to avoid any confusion or potential lawsuits. In the case of loan defaults, terms of the collection of remaining debt should specify the costs that are involved in the collection of the debt.
It should also apply in parties of promissory notes. If you need money for an item like a car or a house or help make your life a lot more manageable, it is a good thing to get familiarize with the types of loans and credits that are available for your needs and what kind of terms you can expect.
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Open-end and closed-end credit option
These two basic types of consumer credits are also- known as revolving credit. It can be used repeatedly to purchase products and will be paid back every month, although, paying the full borrowed amount that is due every month is not required. One of the most common revolving credit types is used by almost a billion people all over the world, the credit card.
HELOC or home equity lines of credit, as well as home equity loans, also fall in this category. Credit cards are usually used for daily expenses like clothing, food, small home renovation, and repairs and transportation. Interest charges are implemented when the balance for the month is not fully paid.
The interests on credit cards can average up to 15%, but it can go for as low as 0% interest rate (usually, banks and credit card companies offer 0% interest rate as an introductory offering) and will go as high as 30 to 50 percent, depending on the payment history and the credit score of the consumer.
Loans for bad credits are tough to find, but low-interest rates are readily available in non-profit debt management programs, even for people who have credit scores below 500. Closed-end credit loans are used to finance a certain purpose for a certain period.
These types of loans are also called installment loans because the consumers are required to follow regular payment schedules that include charges for the interest until the principal loans are paid … READ MORE ...