Types of Loans

Mortgages and advances can help people reach their objectives and make massive life changes. While there are several types of loans, the most common are personal, student, vehicle, mortgage, and payday loans.

If you’re about to make a significant leap and move to another city or renew your home, it’s vital to know all the facts and find a steady financial partner. By choosing OrangeLoans, you can access any of these lending types and turn your life around painlessly. 

This complete guide will help you grasp what each loan entails. 

What this article covers:

What Are the Basic Loan Types?

There are numerous loans people reach out for when in need of a quick cash surge. 

You can get a personal loan, which represents a vast category. And everything from vacation loans to money borrowed for medical bills falls under this label. 

Other kinds of loans offered by banks include car loans, student loans, payday (and weekend) loans, and mortgages. 

types of loans

What Are the Different Types of Loans

There are more classifications when it comes to loans, separated into these categories:

They can be offered to individuals, businesses, and even governments, to increase and leverage one’s budget. 

Secured vs. Unsecured Loans

A secured loan means parties include a certain form of collateral in their agreement. That way, a lender adds an extra level of security, ensuring that the borrower will repay in full throughout the agreed period. 

Most loanees offer stocks and properties, including households, instead of monetary deposits as a guarantee. 

The three basic types of secured loans are mortgages, gold, and car loans.

One of the main perks of secured loans is getting lower interest rates. However, payment methods and limits are also more strict. 

Unsecured loans suggest the borrower doesn’t need to offer any of their possessions as collateral. So, when getting an unsecured loan, the lender will meticulously double-check one’s credit score and overall financial status. 

Personal Loans

Several loans fall under this wide-ranging category. Personal loans can entail nearly anything except the credits used for education. Most personal or private loans come with similar terms, binding a loanee to repay within a 24 to 84-month period. 

loan types

The most common types labelled as “personal” include:

  • Travel loans
  • Medical loans
  • Laptop loans

Aside from these 3 types of loans, other kinds of private repayable credit involve a wedding budget, home renovations, debt consolidation, or moving to a new address. 

A personal loan can be requested during times of crisis or when an accident is implicated, such as emergency funeral loans. 

Travel Loans

Vacation and travel loans are among the most frequently requested personal advances. These loans are meant for those who plan a journey while facing a financial struggle. 

Unlike house or vehicle loans, a travelling loan won’t be secured by collateral. 

How Does a Vacation Loan Work?

First, the loanee specifies the amount they need for their vacation. Then, the bank informs them about the fixed interest rate and schedules the dates when each instalment is to be repaid. 

However, if you plan to get a loan for a holiday, you should explore your options first. The key step you mustn’t skip is to look into banks that grant advancements with low Annual Percentage Rates (APR). 

The best and most affordable deals for holiday loans start from around 9% APR for prime users and loanees with superb credit scores. 

types of loan

Medical Loans

A medical loan is a commonly required unsecured personal loan that provides extra financial means for healthcare issues and similar necessities. These loans can be used for emergencies and planned medical procedures. 

While costly, they come in handy when a user has already used up all other alternatives like savings or payment plans.

Like most other types of loans offered by banks, medical loans entail a fixed rate to be paid within a set period. Most banks allow their loanees to reimburse the costs over two years, while some extend this period up to seven years. 

Cosmetic Surgery Loans

Plastic surgery loans are among the common personal loan types for people whose health insurance policies don’t cover aesthetic or reconstructive surgery. The amount spent on these procedures in Australia annually amounts to a staggering $1 billion. 

The interest rates for cosmetic surgery loans typically vary between 6% and 36%, while the APRs are usually lower for people with perfect credit scores. 

Most loanees request a temporary advance that ranges from $1000 to $50.000. 

The best way to require plastic surgery loans in Australia is by pre-qualifying and comparing fees, conditions, and APRs. 

different types of loans

Laptop Loans

Laptop loans are considered unsecured personal loans, most frequently requested by students. Still, anyone who eagerly needs a brand-new device but currently operates with a small amount of money can try and qualify to borrow a specific amount of cash from a lender. 

The loan then repays the loan with extra interest fees in weekly or monthly instalments throughout a predetermined period. 

Before asking a bank or another loaner to fund your purchase, seek a reliable financial partner. That way, you won’t end up paying much more than you originally planned. 

Compare rates and go for flexibility regarding the minimal and maximal amounts of money you can get. 

Student Loans

A student loan is an agreement between a student and a bank. The loanee borrows financial means from the bank to pay for their college or university education and must pay the money back within a pre-agreed time frame. 

While lenders usually don’t charge any extra fees for these loans, indexation is still applied. It means that a student’s debt increases over time to stay in accordance with its real value. In other words, it’s adjusted to inflation and the raised cost of living.

There are also certain limitations when borrowing money for educational purposes. For instance, vet student loans in Australia can’t surpass a $113,028 loan amount. 

Student loans in Australia have grown over the past few years, reaching an average amount ranging from $20,000 to $40,000. In 2020, these amounts were typically around $23,685, nearly $15,000 more than in 2005. 

kinds of loans offered by banks

Vehicle Loans

These loans usually fall under the “personal loan” category and can be requested to purchase a new or used car.

People who don’t have enough financial means saved and need to get an auto soon tend to lend extra money from banks and other loaners. A commonly picked alternative is to get a loan through a car dealership. 

Car dealers frequently require high-interest rates. This is why banks and online lenders typically represent more affordable options. 

In addition, lower interests can be granted after the pre-approval, helping buyers dodge the enormous fees demanded by a dealer. 

What is a reasonable interest rate for a car loan in Australia? According to 2022 data, most interests range from 5 to 10%. 

Depending on the period at the loanee’s disposal, these figures vary. If it takes longer for them to repay the loaner, the fees often get higher. 

Payday Loans

A payday loan is an unsecured loan requested and paid back within a short period, most commonly in two weeks. It’s a short-term financial advance with a high-interest rate, reimbursed by the loanee as soon as they receive their first payment. 

A borrower usually signs a post-dated check and receives immediate cash in turn. 

While most of these loans cover relatively small amounts of $500 or less, the cumulative debt is often substantially higher. Most Australian loaners request an establishment fee of 20%, while the monthly rates increase the obligation by another 4%. 

However, some lenders ask for ridiculous fees that can go as high as 600%. So it’s best to turn to a reliable loan company and get minimal amounts cut from your next wages. 

These loans, although costly, come with several perks. Firstly, they’re easily accessible with fewer requirements. Studies show that one in ten Australians reaches out to lenders for them. 

what are the types of loans

Weekend Payday Loan

Loans paid on weekends are small cash advances given to borrowers with urgent financial needs or unexpected expenses. 

Signing up for lending right before or during the weekend means that the loanee’s funds, generally, can’t be transferred to their account until Monday. Fortunately, one can get emergency advances from a weekend loans direct lender. 

Most people request payday loans on weekends to pay medical bills, immediate home reparations or replacements, urgent car maintenance, and last-minute travel expenses. 

Since these loans tend to cost more than you’d plan, it’s vital to go with a reputable and honest lender. 

Explore OrgangeLoans deals and solve your financial issues quickly and painlessly. 

Mortgage Loans

A mortgage is a written agreement between a loanee and a lender that grants certain rights to both parties but secures the financial benefit of the lender in the first place. 

For instance, if the borrower doesn’t repay their debt within the agreed timeframe, the lender may have the right to reclaim the property. 

Aside from the fixed amount repayable in equal instalments, borrowers must pay interest ranging from 6% in Australia. 

Before loaning money to buy a home or land, you should learn about the interest rate. An affordable and fair mortgage rate for a fixed loan to be repaid over a 15-year span starts from approximately 5%, while a 30-year mortgage rate starts from 6.09%. 

what are types of loans

Home Equity Loans

They are also called second mortgages. 

They permit homeowners to borrow financial means by using the advantage of the equity in their homes. These mortgages work the same way as the basic ones, allowing borrowers to get a certain amount of cash from the lender and repay in fixed monthly instalments over a predetermined period. 

Their key benefit is lower interest rates than in any other kind of lending. 

Extra Tips for Getting a Mortgage Loan

According to experts, mortgage interest rates should drop from the year 2024. So, if you’re looking into these loans, giving it a few more months before signing a contract would be best. 

Also, keep in mind that the loanee’s credit score and report affect the interest rates, and those able to pay a larger deposit get lower extra fees afterwards. 

And finally, make sure to compare lenders and fees before selecting one. Always use tested providers like OrangeLoans to avoid hidden costs and cash burnout. 

An ideal lender will be prone to granting you a customer loyalty deal, so if you’ve used any of the types of bank loans before, be sure to turn that into an advantage. 

bank loan types

Final Thoughts

These different types of loans grant quick solutions to anyone who needs extra income ASAP. Whether it’s money needed to organise a wedding, a quick trip, or to buy a new MacBook, banks and other lenders can help you out. Loans for the unemployed are also available and significant to get them through the rough patch.

So, it’s essential to know one’s options and pick the most reliable lender that offers low-interest rates and loyalty perks.

Be thorough when seeking the best solution – and rely on our guidelines!

Was the guide helpful? Check out these extra resources to delve deeper: