Loans: Types and How They Work (Student, Auto, Mortgage)

Loans are borrowed sums of money that must be repaid with interest over time. Common types include student, auto, and mortgage loans. Student loans help cover education costs, often with lower interest rates and flexible repayment options, especially federal ones. Auto loans are used to finance vehicle purchases, typically with fixed interest rates and terms ranging from 36 to 72 months. The vehicle itself serves as collateral. Mortgage loans are long-term loans used to buy real estate, often repaid over 15 to 30 years. These loans require credit checks, down payments, and property appraisals. Interest rates may be fixed or adjustable. In all cases, the lender provides the funds upfront, and the borrower agrees to repay the loan in regular installments. Understanding the terms, interest rates, and repayment schedules is crucial to managing debt effectively and maintaining financial health.