The right types of debt are instrumental to your personal and professional growth because they grant you instant access to financial resources that you do not currently own. A well-timed, well-planned loan can empower you to achieve your goals as an individual and as a business owner.
However, you need to be aware that there are various types of debt options available to you.
It is essential that you apply for the suitable kind of loan that is appropriate to your purposes and that you borrow this amount from a reliable, competent financial organization.
This is the risk of getting into the wrong kind of debt with the wrong organization: it may potentially cause you unnecessary monetary challenges and responsibilities in the long run.
Continue reading to learn all about the different types of debt and which one you should choose based on your financial needs and objectives. Discover which organization can provide you with debt options that will enable you to maximize the benefits of your loan program.
What Is Debt?
Debt is defined as a resource that a person owes to another individual or organization. Borrowed cash or goods are common examples of debt.
Two parties are usually involved in a debt transaction. The borrower immediately receives the resource from the lender.
The borrower is under obligation to repay the money or return the goods to the lender after an agreed period of time. He or she is typically required to pay back the original amount plus interest on or before the end of this period.
What Are the Different Types of Debt?
There are two main types of debt: secured debt and unsecured debt.
Secured debt is a type of loan that requires you to pledge your property as collateral in exchange for the borrowed amount of cash.
Home loans and car loans are popular examples of secured debt. In case you are unwilling or unable to pay the amount that you borrowed at the end of the loan period, the person or organization that you owe the debt to may possibly foreclose your home or repossess your car.
Home Loan / Mortgage Loan
A home loan, also known as a mortgage loan, is a form of secured debt that is utilized to purchase a house. The real estate property is used as a collateral for the loan through a process called mortgage origination.
A mortgage gives the lender the option to foreclose and sell the secured property in case the borrower is not able to meet the payment requirements.
Best way to pay It off: These are some of the methods you can employ to pay off your home loan faster:
Transforming the loan from 30 years to 15 years
Opting for bi-weekly payments instead of monthly payments
Making additional mortgage payments annually
Going for debt consolidation in case you have multiple loans
Average Interest Rates: The average 30-year fixed-mortgage Annual Percentage Rate (APR) as of August 2021 is 3.21%.
An automobile loan, also known as an auto loan, is a type of secured debt that is used to buy a brand-new or pre-owned car, truck, or SUV. It utilizes the vehicle you are purchasing as the collateral for the loan.
Auto loans are commonly available from various car dealerships and lenders.
Best way to pay it off: Here are some of the techniques you can use to pay off your auto loan earlier:
Average interest rates: For a brand-new car, the average APR ranges from 3.24% to 13.97%. For a pre-owned car, the average APR is approximately 4.08% to 20.67%.
The actual rate will depend on the lender or dealership you choose. Your credit score will also influence the APR of your auto loan.
Unsecured debt is a form of loan that does not require you to pledge your property as collateral. Instead, it involves a contractual agreement where you are required to repay the funds you borrowed after a certain period of time.
This type of debt is based on the creditor’s trust in your ability and willingness to pay back the loan.
Credit card loans and medical loans are common examples of unsecured debt. This type of debt may potentially be cleared by a legal declaration of bankruptcy.
Credit Card Loan
A credit card loan is a form of unsecured debt that involves the use of a credit card.
Using cash occasionally as a substitute for your credit card
Average interest rates: According to the Federal Reserve System, the average credit card interest rate was 15.91% as of the first quarter of 2021.
A medical loan is a form of unsecured debt that is utilized for medical care expenses like surgeries and emergency treatments. It does not require the use of your property as collateral.
Medical loans are commonly available from banks and online lenders.
Best way to pay it off: These are some useful tips to pay off your medical loans:
Working out a viable payment plan with your healthcare provider
Considering repayment term options that range from 36 to 60 months
Average interest rates: The average interest rates for medical loans range from as low as 4.99% to as high as 35.99%. The actual interest rate of your medical loan will be highly influenced by your current credit score.
Keep in mind that making consistent, timely loan payments for both your secured and unsecured debts can potentially improve your credit score. On the other hand, your failure to pay your loans on time can possibly have a negative impact on your credit score.
Join 121 Financial Credit Union for Loans and Financial Services
Become a Member of 121 Financial Credit Union
Now, you already know all about the various types of debt. You have probably pinpointed which type of loan is most suitable for your current financial needs.
Your next step is to become a member of a reliable credit union. 121 Financial Credit Union is the ideal choice for you if you live in Jacksonville or other surrounding areas in Florida.
Types of Debt Programs and Financial Services We Offer
We can help you achieve your personal or business goals, whether you are planning to buy a new home, purchase a car, build or repair your credit score, establish your financial security, or start or expand a business.
Loan Services / Debt Programs
Here are the various types of debt services that our organization features:
Mortgage Loans: 121 Financial Credit Union provides mortgage loans with fixed rates, so you can retain the original interest rate during the entire loan period. We also provide flexible mortgage plans with adjustable rates, with the option to pay a reduced amount for a fixed number of years. Our organization has developed programs for first-time homebuyers. We also offer special pricing in case the house you are planning to purchase is more costly than typical mortgage loans allow for.
Home Equity Loans: Our home equity loans enable you to borrow up to 90% of the appraised value of your house to finance home renovations and repairs. We provide a versatile “Honey Do” HELOC with a rate as low as 3.75%. Take note that there are no closing costs for credit lines up to $250,000 in case your initial draw is more than $20,000.
Auto Loans: 121 Financial Credit Union provides auto loans with impressively low loan rates. These loans make it convenient for you to buy brand-new or pre-owned vehicles like cars, SUVs, or trucks from many local dealers in Florida.
Recreational Vehicle Loans: We offer up to 100% financing if you are planning to purchase recreational vehicles, such as boats, motorcycles, motorhomes/RVs, travel trailers, and campers. Keep in mind that the loan rates of our recreational vehicle loans depend on various factors, such as the type of vehicle, life span, and financed percentage.
Business Loans: Our business loans empower you to start and grow your business. Secure capital for your local business or company through our financial backing. We have active participation with the Small Business Development Center (SBDC) and the Small Business Administration. We also have professional connections within the Jacksonville business community and beyond.
Personal Loans: 121 Financial Credit Union provides personal loans to meet your own personal financial needs and purposes like unexpected medical expenses and travel plans. These loans feature a fixed interest rate, low minimum payments, and a simple payment schedule for your convenience.
Line of Credit: Our financial institution offers a revolving personal line of credit with low minimum payments and an easy payment schedule. This credit line gives you the opportunity to borrow only the amount that you need and pay only the interest on the amount that you actually borrow.
Secured Loans: Secured loans are backed and supported by your 121 Financial savings account. These loans allow you to make a low-rate loan while continuing to earn interest through your savings. Our secured loans showcase low minimum payments and a simple payment schedule. Plus, you only need to pay the interest on the actual amount that you borrow.
Other Types of Financial Services
Aside from loan programs, 121 Financial Credit Union also provides a broad array of other financial services.
Our organization offers investment services like Traditional and ROTH IRAs, Financial Planning and Retirement, and Financial Learning Center. We also have Online Banking and Personal Banking options plus Insurance Plans and Warranties.
Contact 121 Financial Credit Union To Apply for a Loan
Whether you are interested in secured or unsecured debt, connect with 121 Financial Credit Union to start experiencing the significant advantages of loan programs and financial services to boost your personal and business growth.
Bookmark our blog to gain more helpful knowledge about the various types of debt and other financial matters.
Schedule an appointment at our nearest branch to discuss the possibilities of applying for the loan of your choice with our professional staff.
Call us at (904) 723-6300 during business hours or +1 (800) 342-2352 after office hours to receive live assistance from our expert team. Send us a message if you are interested in the loan services and financial services of 121 Financial Credit Union.