If you don’t have the cash on hand to afford a down payment, you may consider taking out a loan to cover the expense. There are several types of loans borrowers may utilize in order to cover a down payment. However, depending on your financial situation, you may find some loans more advantageous than others.
A down payment is a lump sum of money a buyer puts down to secure the purchase of property or another expensive good or service. Usually, a portion of the total cost is designated for the down payment. You may have had to offer a down payment if you have ever rented or bought a home.
Borrowers may use either a secured or unsecured loan to cover a down payment. Secured loans require collateral, while unsecured loans do not. One of the most common types of secured loans is car title loans. Common types of unsecured loans are payday loans and personal installment loans.
With car title loans, borrowers use the title of their vehicle to secure loan funding. The more equity the borrower has in their vehicle, the more they may be approved for on a car title loan. But car title loans usually come with extremely high-interest rates and brief payback terms. Furthermore, borrowers who miss payments or default on their car title loan risk having their vehicle repossessed and taken to an impound lot.
Payday loans are similar to car title loans in that they come with a short repayment period and high rates. Payday lenders typically expect borrowers to pay back their loans in full within about two weeks or less. You may be able to find a much better loan deal for your Down payment with a personal installment loan.
Personal installment loans are a versatile type of funding available to a wide variety of borrowers. People with good credit, poor credit, and even no credit have access to personal loan products.
Furthermore, personal installment loans from a direct lender may also come with other benefits like:
- Competitive interest rates.
- Flexible repayment terms.
- Quick approval and funding process.
- Potential to improve your credit score!