Loan (FC)

Today in my afterschool program we learned about loans. Loans are money that has been given from one person (the lender) to another (the borrow) with a promise to repay. When you borrow a loan you sign a contract agreeing to make a certain number of payments for a certain amount by a particular date each month. Your payments on a loan and even borrowing the loan itself has an impact on your credit. There are seven types of loans. Open-ended loans, closed-end loans, secured loans, unsecured loans, conventional loans, pay day loans, and advance-fee loans.

Open-ended loans are loans that you can borrow over and over. Closed-ended loans cannot be borrowed once they’ve been repaid. When you make payments on closed-ended loans, the balance of the loan goes down. Some types of closed-ended loans are mortgage loans, auto loans, and student loans. Secured loans are loans that rely on an asset as collateral for the loan. Unsecured loans don’t have asset for collateral. These loans may be more difficult to get and have higher interest rates. Unsecured loans rely on your credit history and your income to qualify you for the loan. Conventional loans are those that aren’t insured by a government agency like the Federal Housing Administration (FHA), Rural Housing Service (RHS), or the Veterans Administration (VA). Payday loans are short-term loans borrowed using your next paycheck as guarantee for the loan. Advance-fee loans aren’t really loans at all. In fact, they’re simply scams to get money from you. 

Borrowing a loan impacts your credit score. The loan applications impact your credit. Timely loan payments raise credit scores and high loan balances may harm your credit. From this I learned the different types of loans. Which ones are good loans to take out and which ones I shouldn't take out.