Show Me the Money: 4 of the Most Common Loans
Loans are a big part of life as an adult, and that’s why it’s so important to have a good understanding of them. In most cases, you’re not going to have a lot of extra cash just standing around available to you. Because of this, when you want to make a major purchase, you have to get money from somewhere in order to pay for things up front. That is where loans come into play.
But, unfortunately, many times, people don’t go into the idea of getting a loan with all the information that they need. Take some time to research before you sign any contracts, especially when it comes to auto loans, education loans, and home loans. Equally important is that if you plan on getting a loan from your friends or family, make sure that everyone understands their expectations.
When it’s time to buy a new car, it’s usually time to get an auto loan. Maybe earlier on in life, you could pay cash for a junker. But later on, as an adult, especially if you have a family, you’re probably going to have to get a loan or some other type of financing.
New cars can be incredibly expensive. Yes, it’s a long-term investment. That’s why you should purchase the kind of car that makes the most sense for the most prolonged time frame. To do this, you often need that influx of cash at the beginning of the process.
Getting an education is expensive! Most people don’t have $80,000 in their bank account to pay for a few years of college upfront. Because of this, most people end up getting education loans. Primarily, these are initially funded by the government. After a certain point, though, you have to use private loans to shore up your ability to pay tuition fees.
It’s important to consider that though education loans have a lower interest rate, because of the massive amount of money they are usually for, the debt can follow you for years and potentially even decades.
Perhaps even more expensive than your education is going to be the first home that you buy. Unless you have half of a million dollars floating around and available, you’re going to have to get a home loan. When you start looking at extended timelines, mortgages and interest rates become very crucial.
Assuming that you’re going to be paying some of these amounts for the next 30 years makes you really think hard about the decision that you have to make.
Personal Family Loans
Sometimes all you need is a loan from a family member or a friend. It can be a good way to avoid interest rates. The thing to pay attention to with this kind of arrangement though is that your friends and family can still get mad at you if you don’t pay them back! Don’t take people’s goodwill for granted when it comes to money.