What Loan Is Right For You? | Florida Capital Bank

Staying out of debt is certainly wise financial advice. However, you will not always always be able to afford to pay cash for everything that you need or want. There are some things that are going to require borrowing money in order to finance the purchase.

These big-ticket items may include a car, a college education or a home. For instance, the total cost of buying a house may require multiple years of income. It would be nearly impossible to acquire enough money to purchase a house without a loan. This means that at some point in your life, you are going to have to approach a bank about getting a loan.

Here some of the basic kinds of loans that you can get from your bank or credit union:

Home Loans

  • Known as mortgages, these loans are designed to finance the purchase of a home.

  • Typically, a down payment of as much as 20% of the price is required. The larger the down payment, the smaller your loan.

  • Many home loans have repayment periods of 30 years.

  • Most homes tend to grow in value over the years. You want to make sure that the home you buy does this. When your home value increases, your home is worth more than the amount that you owe on the mortgage. You are said to have equity in the home. You can take out new loans against this equity for home improvements, financing a new home purchase or a college education for your children.

  • It can be a real disaster if your home value declines. Then you will owe more on the loan than your home is worth. You can avoid this by purchasing a well constructed home in a good neighborhood. You can also add value by making improvements to your home.

  • If you are unable to make your payment, your lending institution can foreclose on your home.

Business Loans

  • Business loan are used for companies that are growing and need capital to expand. They are also used to provide start-up financing for a new business.

  • It is often easier for an established business to get a loan from a bank.

  • If you are just starting your business, you might look at an alternative lending institution like the Small Business Association.

  • You will have to make a presentation to the lender to get your loan. They are going to want to hear about your business’s financial condition and plan.

  • You will also have to put up a valuable asset as collateral on the loan.

Personal Loans

  • These loans provide funds to be used at your discretion. For example, you might use these funds for emergencies. Often people might use them for a wedding or a unique vacation. They can also be used to consolidate other debt.

  • Because these loans are not secured by any kind of valuable asset, they are difficult to obtain.

  • You must have good credit and an ongoing relationship with that particular bank to qualify for a personal loan.

  • The amount you can borrow on a personal loan is usually relatively small.

  • If you cannot make the payments on this loan, the bank can send it to collections and pursue legal action against you.

Auto Loans

  • Used to purchase automobiles, boats, trailers, and other large items.

  • These loans require a down payment. The larger the down payment you are able to make, the smaller your loan will be.

  • Get pre-approved for a loan by a bank before you go shopping at the dealers. Then you can deal with the issue of how much you can afford away from the high-pressure sales situation when you are at the auto dealership.

  • Most auto loans have repayment periods of a few years.

  • Cars always lose their value over time. You might consider gap insurance that will cover any difference between the value of your car and the amount you owe on the loan if something should happen to your car.

  • Avoid loans that don’t allow you to pay off your debt early.

  • Be sure you can meet the monthly payment commitment or the bank can repossess your car.

The best way to protect your credit and your financial interests is avoid frivolous borrowing but there will always be situations where you may need to borrow money. In those cases, you want to be educated about what your options are so that you can obtain the most favorable conditions to borrow money. Your local lending institution will be a great help to you but you should also do your best to educate yourself on loaning possibilities.