Good loans are the loans that are approached for a good investment, such as creating a business or approaching a study to generate future benefits. Following are a few examples of good loans.
Student Loans
Student loans are meant for students, mostly for those who their parents cannot afford, to pay for tuition, fees and living expenses at accredited schools. In the United States, there are two types of student loans, federal student loan and private. Federal student loans generally come with more protections and benefits but charge slightly higher interest rates. Private student loans come with much fewer protections and benefits, but if your credit is good, you could qualify for lower interest rate.
It is worthy to obtain a student loan as it’s considered to be an important future investment. Investing in education can lead to financial benefits in the future. As college graduates may have more financial stability and the median earnings for an individual with a bachelor’s degree are 67 percent higher than those with a high school diploma, for instance.
The lower interest rate on student loans globally is in Finland. The interest rate on student loans in Finland is between 0.48 to 2 percent. And in most countries, paying more than the required monthly payment can reduce the amount of interest you pay and total loan cost over the life of the loan.
Start-Up Loan
A start-Up loan is a loan for business purposes. In most countries, a Start-Up Loan is a type of government-backed personal loan available to individuals looking to start or grow a business. In addition to finance, successful applicants receive 12 months of free mentoring and exclusive business offers to help them succeed.
The interest on start-up loans are lower in most country. For instance, in the United Kingdom, the interest is 6 percent with a repayment term between 1 to 5 years. The loan is unsecured, so there’s no need to put forward any assets or guarantors to support an application. All owners or partners in a business can individually apply for a start-up loan.
Small Business Loans
There are several types of small business loans, including Small Business Administration SBA loans, working capital loans, term loans and equipment loans. These loans help small businesses fund their operations. Local businesses, such as landscapers, hair salons, restaurants, family-owned grocers, or freelancers who still have a traditional day job, also can apply.
Small business loans typically have more qualification requirements than personal loans, especially if you’re applying for an SBA loan. However, the rewards are well worth it because these loans can give your business the financing it needs to grow. Alternative business financing methods, like invoice factoring or merchant cash advances, may be more costly. Therefore, small business loans are considered to be the best option for business financing.
Mortgage Loans
Mortgage loans help individuals finance the purchase of a home, and there are many types of mortgages available. Banks and credit unions are common mortgage lenders in the United States. However, they may sell their loans to a federally-sponsored group, such as Fannie Mae or Freddie Mac, if it’s a qualified mortgage.
The greatest advantage of mortgage loans are.
- Have the loan at very low-interest rates as opposed to most other loans.
- In most countries, the interest paid on your home mortgage is deductible, up to certain limits, on your tax return. The value of the deduction depends on the amount of interest and your tax bracket
- One of the most advantages of a mortgage is the resulting leverage
- Insurance against an earthquake strikes, your insurance will eventually help you rebuild your home, assuming you have earthquake insurance.
Home Equity Loans
If you have equity in your home, you might be able to use a home equity loan, also known as a second mortgage. The equity you have in your home, the portion of your home that you own, and not the bank, secures the loan. You can typically borrow up to 85 percent of your home’s equity, which is paid out as a lump sum amount and repaid over five to 30 years.
A home equity loan could be a good idea if you use the funds to improve a home or consolidate debt with a lower interest rate. However, a home equity loan is a bad idea if it will overburden your finances or if it only serves to shift debt around.
Land Loans
There are a lot of reasons people buy land. The reason may be that they want to build a house, harvest its natural resources or lease it out to other people and businesses. Also, land can be left to be appreciated. However, the land is considered to be an expensive asset, and that’s where a land loan is considered by many.
Land loans generally come in two forms: improved and unimproved land loans. Improved land loans are for plots that are ready to build on. On the other hand, unimproved land loans are for a plot of vacant land, which may or may not be easy to access.
If you choose to take out a land loan, you can expect to have higher interest rates and more strict down payments and credit requirements than other property loans, as land loans are a more risky transaction for a lender.
Above is an explanation about a lot of the different types of good loans to generate more profits. Also, individuals can have other financing options beyond loans to utilize and create business, such as raising money and saving to invest.