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Equity Home Loan Loan Mortgage Refinancing Article

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Different Types of Loans

A loan is an amount of money that one party gives to another.

The party that gives money is known as lender and the one that

receives money is known as borrower. Lenders have surplus funds

that they lend to borrowers who have an urgent need of money. In

return, lenders charge borrowers a fee known as interest.

There are several types of loans:

Secured & Unsecured Loans Secured loans are loans that

require borrowers to offer their property as collateral. This

reduces the risk for lenders and they charge low rates of

interest. Unsecured loans, on the other hand, do not require

collateral and consequently, they carry high rates of interest.

Fixed Rate & Adjustable Rate Loans In case of fixed rate

loans, the rate of interest remains the same all along the loan

period. As a result of this, the amount of monthly payments

remains the same throughout the loan period irrespective of

changes in the interest rates prevalent in the market. On the

other hand, the rate of interest on adjustable rate loans and

monthly payments keep changing as the interest rates prevalent

in the market fluctuate.

Hybrid Loans

Hybrid loans are a combination of fixed rate and adjustable

rate loans. In the beginning, the rate of interest is fixed.

After a few years, the interest rate becomes adjustable and

starts fluctuating.

Balloon Loans

In case of balloon loans, the borrower has to pay a very small

amount of monthly installments so that a large unpaid balance

remains at the end of the loan period. This large unpaid balance

is repaid at once when the loan period expires.

Home Equity Loans A home equity loan is a second mortgage

loan that is taken when your house is already mortgaged and you

are in a need of more funds. Home equity is the value left in a

house after subtracting the unpaid mortgage balance from the

current value of the house.

Debt Consolidation Loan A debt consolidation loan is a

loan taken to consolidate a number of loans into one manageable

loan. A debt consolidation loan can help you in reducing the

cost of your total debt as it usually carries a lower rate of

interest than your existing loans.

Seek.Uk

http://www.seek.uk.com

About the author:

Seek.Uk

http://www.seek.uk.com

Online finance directory in UK offering Loans, secured loans,

unsecured loan, Mortgages, Credit Cards, Insurance, Life &

pension, Investments, Finanace Advice and other business related

services.

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