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Whether you’re starting a business, buying your first home, or just need a bit of cash to make it through the month, there are dozens of loans options available. Understanding which type of loan best fits your needs can be a daunting task. Here are four of the most common types of bank loans and how they work.

Loans are generally broken down into two main categories: unsecured and secured. An unsecured loan does not require collateral. This is great because less stress is put on consumers, but higher risk is on the bank. These cash loans are usually short term and for low amounts. Secured loans require collateral that can be taken if the consumer faults or fails to repay the loan. These loans are often high value and long term loans.

#1 Personal Loans

Most banks provide some form of personal loans which consumers may use towards an expense such as buying a new TV or paying off a bill. Personal loans are typically unsecured and low in value. Lenders often require a form of identification from the consumer and proof of assets equal to or greater than the loan requested. The approval process only takes a few days, but interest rates are generally high.

#2 Credit Cards

Credit cards are one of the most widely accepted forms of payment, while essentially being a loan. The application process is usually quick and credit lines can vary from a few thousand to endless limits. One major advantage of credit cards is that funds are guaranteed and protected from the lender, this adds a level of protection for consumers. A major downside of credit cards is that interest rates can be high, and continual unpaid balances can rack up major interest fees.

#3 Home Equity Loans

Most home buyers are aware of home equity loans, most commonly known as mortgages. These large, long-term loans are usually secured and require some form of collateral often the property itself. Interest rates can be as low as a single percent, but as principal costs are high even low-interest rates can become huge fines when unpaid.

A similar form of home equity loan is a line of credit. The same general rules apply to lines of credit, however, they allow consumers to borrow more funds after a percentage of the original loan has been repaid.

#4 Small Business Loans

Small business loans are often provided by either the Small Business Administration (SBA) or a local bank. Loan terms vary in both value and length, and interest rates are often flexible. As business loans can range from thousands to millions of dollars, collateral is required. The approval process is strict and obtaining a loan can be difficult.

A loan can often make a life changing difference in a person’s life. With dozens of options to fit your exact needs, taking out a loan should not be ignored. Just be sure to understand the conditions and choose what’s right for you.