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The first things that generally come to mind are personal loans, home loans, car loans and student type of loan. Still, the world of finance is wide and varied with numerous different types of loans which are less known since they cater to particular requirements or circumstances. Below, we will examine some of the lesser known types of loans available, but these loan options could be right up your alley depending on what you are looking to do.
1. Balloon Loans
Ballon loans are special in that they offer low monthly payments, but a large lump sum payment is due at the end of your loan term. Such a loan could be enticing for, say, someone who anticipates getting lots of cash down the line — like an annual bonus or inheritance.
Pros:
Lower monthly payments.
Best if you anticipate a significant income later.
Cons:
Failure to meet final large repayment.
Financial problems if the anticipated lump sum does not come through.
2. Bridge Loans
A bridge loan is a short-term loan to provide funds for the down payment of. They make up a particularly good use case in real estate which is time-sensitive.
Pros:
Provides immediate cash flow.
Assists in quickly acquiring new property.
Cons:
Higher interest rates.
On the term end of less than a year.
3. Microloans
WHAT ARE MICROLOANSMicroloans are tiny loans provided to help small scale businesses or business owners one would not qualify for traditional bank loan. Typically these loans are offered by non-profits or local authorities focused on economic development.
Pros:
Affordable for small business and startups.
Aid in the growth of local economy
Cons:
Smaller loan amounts.
Could carry higher interest rates than conventional business loans
4. Peer-to-Peer (P2P) Loans
The loans are peer-to-peer (P2P), which means they’re funded through online platforms that connect borrowers to investors. The bad credit guarantor loanThis kind of a loan is perhaps most useful for people who cannot secure the loans from anywhere as they are paralysed by their history.
Pros:
Terms and conditions are flexible
Possibly better rates
Cons:
Default once a borrower cannot pay back.
Balancing the Risk of Higher Investor Returns
5. Convertible Loans
Convertible loans are mainly loan agreements that convert into equity in regards to the business at a later period. It is a loan that many startups enjoy accessing because it helps them get their foot in the door when come promising business comes up.
Pros:
Gives you seed money, without losing any control.
Conversion Into Stock
Cons:
Elliptical Terms and Conditions
If converted, risk of equity dilution.
6. No-Interest Loans
Most frequently provided by non-profits or governmental programs, a no-interest loan is established to help those in financial hardships. They tend to be very appealing among those who are in dire need of some financial respite, since well the loans do not bear any interest.
Pros:
No interest costs.
Financial Crises: The Safety Net
Cons:
Usually small loan amounts.
Learners must qualify to attend, and are subject to availability.
7. Payday Alternative Loans (PALs) ™
A form of payday loan offered by federal credit unions, Payday Alternative Loans allow for a more affordable and safer alternative to traditional payday loans. These loans have reduced fees and interestOUSEs.
Pros:
Interest rates in comparison to payday loans are less.
Regulated by FCUs (Federal Credit Unions)
Cons:
Members of a federal credit union only
Less money borrowed and less time to pay it back.
8. Crowdfunding Loans
Crowdfunding loans are actually a type of P2P loan that is funded by investors who contribute to the amount needed through an online platform—typically many crowdfunders each pitching in small amounts cumulatively. These are perfect loans for businesses or developments that have wide community support or large niche markets.
Pros:
Pool of Investors
Flexible funding amounts.
Cons:
Needs huge network marketing to pull in investors.
Pros: You will NOT be fined if you do not reach your funding target.
Conclusion
Such a great amount about the universe of loans is very extraordinary that we never experience it in our lives. With knowledge of these alternative loan choices, consumers and companies can navigate their financial path easier to locate a solution that will ideal suit for its specific needs. The right loan, from a balloon loan to avoid large future payments, or even crowd funding loans that will help you engage your community can be essential on the road to stability and growth in wealth.
