What types of loans are safe for you to use?

Auto Loans
An auto loan helps you buy a new or used car. For many people it's better to save the amount needed to purchase a vehicle and avoid paying interest costs, but for others, it's a little tougher. An auto loan usually requires a down payment; then you have to make monthly payments that include interest. You typically have 4 to 5 years to repay, although some lenders may let you take up to 7 years, which makes lower monthly payments possible — but also a lot more interest costs.

Mortgage Loans
These loans can help you buy a home. Most people don't have enough money to pay cash for such a large purchase, so they borrow from their financial institution. A mortgage requires a monthly payment, which includes interest charges. Mortgage loans usually require a down payment and give you 15 to 30 years to repay.

Student Loans
Several types of student loans are currently available:

• Perkins Loan : This loan has a very low interest rate and is available for undergraduate college students who require a large amount of financial assistance. If you qualify, you can borrow up to $4,000 each school year, not exceeding $20,000.
• Subsidized Stafford Loan : This loan is available for undergraduate college students who require financial assistance. The federal government pays for the interest of the loan, while the student is in school and for six months after the student graduates. If you qualify, you can borrow from $2,625 to $5,500 for a total of $23,000.
• Unsubsidized Stafford Loan : This loan is different from the two types above because it is not based on a student’s financial need. It can be given to any student who meets the criteria. If you qualify, you can borrow from $2,625 to $5,500 for a total of $23,000.
• Private Loan: This type of loan is usually not the best option for a student. Many financial institutions offer educational loans, but unfortunately they usually have a much higher interest rate then the other loan types listed above. Before taking on a private loan from a financial institution, you should first check to see if you can qualify for other types of loans based on financial need.

What types are not financially safe?  

Payday Loans
With a payday loan, you are borrowing money before your receive your paycheck. These loans are usually utilized by people in need of emergency cash. A payday lender generally has a simple loan approval process, but the interest rates are extremely high. This type of loan does not help you build a good credit history.  

Title Loans
Title loans are similar to payday loans, but the collateral for the loan is your car. They are also usually used when someone is in need of emergency cash. If you are in a financial bind, take a title loan and then are unable to repay the loan, you could end up paying even higher interest rates, late payment charges, and even losing your car. This type of loan does not help you build a good credit history.

Rent-to-Own
This is when you buy items using a long-term payment plan. The rent-to-own system is usually very easy to qualify for, but you usually have weekly payments with high interest rates. These payments end up costing you much more than the item is really worth. If you miss a payment, the company can take back the item, no matter how much money you have already paid for it. This type of loan does not help you build a good credit history.