One of the ways that most banks and financial institutions make money today is by offering loans to both businesses and individuals. From an individual’s stand point these loans can offer instant relief or even long term financial relief depending on the nature of the loan they got. However, it is very important to understand that all loans or consumer level loans are not the same and may differ in interest rates, repayment flexibility and even if you are able to get them restructured.
Consumer loans tend to be different from business loans in a number of ways. From a finance view point consumer level loans tend to be riskier as compared to loans offered to businesses and probably this is why consumer loans tend to have a higher interest rate associated with them. Also many consumer loans have a fixed rate of interest associated with them.
Credit cards tend to be by far the most common and hence widely used form of consumer loans. The reason why credit cards are so common is because they are so easy and convenient to use. People use it for everything from shopping at retail stores to getting gas at the gas station. Consumers can avoid a rather high interest rate associated with most credit cards by paying their bills on time i.e. shortly after the transaction has been made.
Mortgages and Auto Loans
Home finance also known as a mortgage is possibly the most helpful type of consumer loan ever. This type of loan provides an individual with a certain amount of money based on their credit rating and income which allows for them to purchase a home. The loan is then paid back in monthly installments.
An auto loan works similar to a mortgage with the exception being that a person can purchase a new or used car with the sanctioned amount. The installments or repayments are made on a monthly basis or as otherwise decided upon by both particles.
Payday loans are one of the newer types of consumer loans which has become especially popular owing to a number of web based finance companies offering this service. The way these loans work is also pretty amazing. A person who finds him or herself in desperate need of cash can apply for these loans online without the need for any additional documentation and receive the loan within a day. The loan however has a high interest rate associated with it and needs to be paid as soon as the borrower gets his or her salary, guaranteed by a postdated check.