Types of Consumer Loans in the USA

We always try to be cost-conscious and forward-looking, planning our family budgets meticulously. However, Americans often make impulsive purchases, buying multiple devices, clothes and footwear online or in the local stores. Being attributed to some negative circumstances, unplanned purchases can be beneficial as they cause the essential positive emotions.

So, when we lack money, but want to buy something that we don’t really need, or pay some essential expenses, consumer loans can help us. According to the dictionary, consumer loans are the credits that are given directly to the households or residents for purchase of various consumer goods. These credits that are commonly short-time and expensive, including payday loans, are provided for buying durable goods, such as cars, houses and apartments, furniture or for minor purchases, for example of smartphones, household appliances and essentials: foodstuffs, child-care items, etc.

Basic Types of Consumer Loans

The common types of the fast credits that are incredibly popular in the USA nowadays are secured and unsecured loans. According to the recent statistics provided by the Statista website, the total amount of consumer debt in the USA is increasing dramatically, making about 3.84 trillion dollars in 2017. It seems like the negative developments overall but still means that the loans are quite essential and highly demanded.

Thus, secured loans are the ones that are protected by any piece of collateral, such as a car, a house, etc. These credits include mortgages, title loans, pawnbroker and CD-secured loans that are provided to the Certificate of Deposits’ owners. To apply for the certain amount of money that is commonly significant, you are to own some possessions. The lenders that fail to pay the credit in time risk to lose the collateral. Additionally, the loans may be used for meeting some personal or household needs such as utilities, trips, medical expenses, etc.

Alternatively, unsecured loans are provided without any pieces of property collateral. They imply no guarantees for the lenders, and, therefore, they are high-interest and quite risky. The credits of this sort include personal, student and payday loans, credit cards. Meanwhile, they are commonly fast, easy-to-get and short-time. Additionally, the loans may be used for meeting some personal or household needs such as utilities, trips, medical expenses, etc.

Specific Consumer Loans’ Types

Our customary customer loans include:

  • mortgages;
  • cash advances;
  • student;
  • auto;
  • personal;
  • payday loans.

Mortgages allow borrowers buy houses or apartments, paying not upfront, but by affordable monthly amounts. In case of the payback failure, the real estate item can be used as the foreclosure. Thus, the loans are the least risky and they come with low interest rates.

Auto loans are based on the similar approach, but they are commonly high-interest and riskier.

Personal loans don’t stipulate any specific needs or expenses. The borrower can use the money as they wish, reducing the credit cards’ interest rate or buying some products.

According to Wikipedia, payday loans are short-time, high-interest credits that are designed to bridge any gap from the recent to the next paycheck. They are commonly used for emergencies that could not be planned initially.

Additionally, you can borrow some money from your relatives and friends or use a cash advance that is charged against your credit card. Therefore, we are always free to make any purchase and buy any product we like even if it is not very essential or come with the price that exceeds the expenditures that are included to the family budget.

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