It’s no exaggeration to say that credit runs our economy. Individuals use loans to pay for every major asset they own and businesses run by trading on capital. There’s a misconception among many people that credit is a bad thing. You’d rather pay for everything with money you have than with money you’ don’t, after all. However, when done responsibly, using a loan can often be one of the best financial decisions to make.
The reason for this is that, while we feel more secure when we’ve paid
upfront for something, being able to defer payment to a later stage creates
better budgeting opportunities and can prevent running out of funds early in
Also, taking out loans you know you can pay
off builds your credit score. Paying back on the agreed dates every term will
see your credit score get steadily higher, giving you even better lending
opportunities in the future.
That said, when used irresponsibly by consumers
or by predatory loan companies, credit can indeed make life a misery. It’s
important to be knowledgeable about all aspects of a loan before committing to
one, whether you’re getting a student loan, personal loan, or medical loan.
Here’s what you need to know about the
three most common types of loans in the US.
Top 3 Loans In The US
The United States economy is a leading
example of how a capitalist culture operates. The government tends to apply as
little regulation as possible on the basis that too much interference can harm
economic growth. One of the unintended consequences of this is that companies
can charge as much as they want for services and products that average
Americans need. The following types of loans are the most common in the US.
Healthcare in the US is more expensive than
anywhere else and is twice as high as other high-income nations.
Though services and medication prices are regulated elsewhere, this is
typically not the case in the US. And as a matter of life and death, people
have no choice but to pay whatever it takes to get the medical care they need.
Medical loans are therefore highly sought
after. When someone has an illness like cancer, for example, exorbitant costs
are impossible for many people to afford, even with insurance. The same is true
for people with chronic illnesses.
Medical loans can, unfortunately, spiral
out of control, considering that treatment may go on indefinitely and prevent
individuals from earning money. It’s crucial that you do your homework before
getting a medical loan. There are some excellent options out there so make sure
to avoid predatory companies at all costs.
College is not as vital as healthcare.
However, in the past few decades, young people have been raised with the
understanding that they need a college degree to succeed. Unfortunately, college
tuition is very expensive, especially for youths who are unable to work high
paying jobs. If their parents cannot afford tuition fees, they may have no
choice but to get a loan.
It’s no wonder that student loans are such
a major part of political discourse these days. No matter what your views on
the subject, if you’re in college, student loans are likely to have a big
impact on you.
Student loans come with different
conditions to most other types of loans, considering students will only be able
to repay them in the future. There’s no doubt that, unless regulations are
enforced, third-party student loans will
continue to be one of the most common types of loans in the country.
A personal loan is any loan that is taken
out by an individual for a personal purpose. Unlike a car or home loan, a
personal loan is usually taken for a less defined reason. Furthermore, there is
no asset that is automatically used as security, and you therefore require a
higher credit score. You may also have to negotiate higher interest rates.
Personal loans can be used to cover one-off
expenses, such as weddings, funerals, vacations, or home improvements. They can
be taken out very responsibly, with little risk involved if you’re not taking
them under tremendous pressure.
Of course, sometimes people take out
personal loans because they’re struggling to make ends meet. This can easily
lead to a debt cycle, with the person unable to make payments once the loaned
money runs out.
However, personal loans can also be used in
such a way that they provide opportunities to make more money, rather than the
possibility of crumbling under the weight of debt.
Many Americans rely on loans, specifically
for services that are seen as vital, such as healthcare and college. When used
responsibly, loans can help you increase your wealth and create opportunities.
They certainly don’t need to lead to a cycle of debt but should always be used