While having a bunch of loans isn’t always the best financial move, there are good reasons to get loans. For most people, loans are the best or only way to finance big life decisions. So, taking out a sensible loan is not always a negative. On the other hand, some loans are a considerable risk.
But, while you probably know about home loans, car loans, and student loans, many other loan types exist. Some are highly beneficial in specific situations, while others are best avoided.
Learn more about some lesser-known but still widespread types of loans and get some information on their benefits and drawbacks.
- Pre-Settlement Loans/Lawsuit Loans
These types of loans might not be familiar to many people, but they are necessary. While no one ever wants to end up in a lawsuit like a personal injury case, accidents due to negligence or dangerous behavior do happen. When you’ve been injured in a car accident, workplace injury, etc., you might need money to pay for medical bills and more immediately.
So, a pre-settlement or lawsuit loan is there to payout some or all of the money you’re asking for ahead of time. In most cases, these loans are a good bet and are a standard part of the legal process, especially given that legal matters can drag out for months or even years.
- Recreational Vehicle Loans
While many people take out a loan to purchase a car, it’s also possible to get a loan for other kinds of vehicles. These loans can be used for boats, ATVs, and more. Enjoying recreation and the outdoors is a lot of fun, so a recreational vehicle loan helps some people do these hobbies when they can’t afford an outright purchase.
The way these loans function depends on the cost of the vehicle. For example, an RV that costs $400,000k will have very different terms than a loan for a used ATV. Generally, these loans make sense if you can make the monthly payments over time.
- Payday Loans
You may have heard payday loans mentioned before, but unlike some other loans, they usually aren’t discussed positively. There’s a good reason for this. While some loans have reasonable terms, most payday loans are predatory. They are short-term loans you’re usually expected to pay off by your next payday. And, while you don’t have any credit to get them, they typically have very high fees. So, these are generally a last resort that’s best to avoid if possible.
- Pool Loans
Many people would love a pool on their property, but installing one is rarely cheap. So, getting a loan for a pool or other home upgrades is possible. But, with a loan like this, you’ll want to weigh the pros and the cons. If the pool is something you can pay off and if it increases the value of your property, it might be worth it. However, as with all nonessential loans, it’s essential to ensure you’re not getting into a commitment you can’t keep.
- Credit Builder Loans
For people who don’t have any credit or have bad credit, a credit builder loan is meant to help. This type of loan is unique, however, as you make monthly payments on the loan and then get your money back at the end. This is because credit builder loans are to show you can make consistent loan payments. So, overall, they are a safe option to build up credit, especially if you don’t have any at all.