When it comes to financing large purchases, most consumers rely on loans. Loans can be used for various purposes, such as buying a car, purchasing a home, or starting a business. Understanding the different types of loans available and how they work can help you make informed financial decisions. In this article, we’ll explore the most common loans that consumers get.

1. Mortgages A mortgage is a loan used to finance the purchase of a home. Most mortgages have a repayment period of 15 to 30 years, and the interest rate can be fixed or adjustable. To qualify for a mortgage, lenders will review your credit score, income, debt-to-income ratio, and employment history.
2. Auto Loans Auto loans are used to finance the purchase of a car or other vehicle. They can be secured or unsecured, with secured loans requiring collateral in the form of the vehicle itself. Auto loan terms vary, with some lenders offering repayment periods of up to 84 months. Interest rates can be fixed or variable and are based on factors such as credit score, income, and debt-to-income ratio.
3. Personal Loans Personal loans are unsecured loans that can be used for any purpose. They are often used for consolidating high-interest debt, paying for unexpected expenses, or financing home improvements. Personal loan terms vary, with some lenders offering repayment periods of up to 7 years. Interest rates can be fixed or variable and are based on factors such as credit score, income, and debt-to-income ratio.
4. Student Loans Student loans are used to finance higher education expenses such as tuition, books, and room and board. They can be federal or private, with federal loans offering more favorable terms and repayment options. Student loan repayment periods vary, with some loans offering repayment periods of up to 25 years. Interest rates can be fixed or variable and are based on factors such as credit score and income.
5. Small Business Loans Small business loans are used to finance the startup or expansion of a small business. They can be secured or unsecured, with secured loans requiring collateral. Small business loan terms vary, with some lenders offering repayment periods of up to 25 years. Interest rates can be fixed or variable and are based on factors such as credit score, business revenue, and debt-to-income ratio.
6. Credit Cards Credit cards are a type of revolving credit that can be used for everyday purchases. They can also be used for cash advances, balance transfers, and other transactions. Credit card terms vary, with some cards offering rewards such as cash back or points. Interest rates can be fixed or variable and are based on factors such as credit score and payment history.

In conclusion, these are the most common loans that consumers get. Understanding the differences between them can help you make informed financial decisions and choose the loan that’s right for you. It’s important to remember that all loans come with costs, such as interest rates and fees, and that borrowing money comes with risks. Always read the terms and conditions carefully and make sure you can afford to repay the loan before signing on the dotted line.