Payday Loan: Compare it with other Types of Debts
When we think about the debt, we think of it as a whole without regard to how it is increased or who we owe it to. For most people debt means the same. But if we look at various types of debts we can notice some peculiarities:
- Mortgage debt may be determined by a first mortgage on a home, its credit line or any other kind of loan that is saved by owing a part of property or any real estate. A lien may be slapped on the estate until a debt is repaid. Such debt may be accompanied by an adjustable-rate mortgage that will rise in time over a fixed interest that stays permanent for the credit period. With a so called “second mortgage” a creditor is repaid only after the fully recovery of first mortgage. Period of such credits is from 10 till 30 years.
- Auto loan is borrowing a determined sum for the purchase and afterwards repaying it with a monthly payment. The period of such credit is usually from 24 till 60 months. The rate of interest is often fixed for the term of the credit except cases when the debtor decides to refinance the loan at lower interest rate.
- Payday loans are narrow term loans that are usually used to overcome moderate financial problems. Most creditors don’t demand credit history. Such debts are expected to be paid off with the first pay check. Peculiarity of such loans is extremely high interest rate.
- Student loans are used to get high education. Thus they are fixed by federal government. Such credits have the lowest interest rate. The repayment period of student loans are about 10 years. It gives a borrower a chance to graduate, find a job and pay back their debt.
- Credit cards allow their cardholders to pay for the goods later, without having money down. Lenders approve borrowers for an accurate sum of money on condition that cardholder will pay monthly at least minimum required sum. Interest rates form in dependent on the borrower’s credit score.
Sometimes borrowing on loan is necessary thing, but you should study the features of each type of credit and understand the risk.