Lenders And Most Common Type Of Loans

Posted by Nick Niesen on November 8th, 2010

According to nwmservices.com ?any licensed person or entity advancing funds that are to be repaid. Also known as a mortgagee? In other words lender is someone who lends money temporarily to a person on the assurance that he repays within an agreed amount of time with interest. These lenders may lend money for different purpose or stated in other words money is borrowed for different reasons like educational loan, hospital loan, loan to built a house, loan to start a business, etc. Different sources like individuals, savings and lending institutions, Banks, Government etc., again offer loans. The most common reason for borrowing is car loan, personal loan and home loan. The lenders usually ask for a security before the money is lent, the security might be in the form of an asset like house, land etc.,

What we are going to see here are the most common types of loan prevalent in United States. The common type of mortgages are a. Fixed Rate Mortgage b. 30 year fixed rate mortgages c. 15-year fixed rate mortgage and d. Adjustable Rate Mortgages and e. Balloon Mortgages.

According to the Fixed Rate Mortgage, the loan interest remains fixed for a long period of time and doesn?t change. The only disadvantage is that, when the interest decreases the rate remains the same and the borrower looses on the decreased rate. In case of the 15-year fixed rate mortgage the loan amount and the interest remain fixed for 15 years (by which time the house can be built and the amount paid off) this can be applied to cases of short term loan and the owner decide to sell the house in a few years time. In case of the 40-year fixed mortgage rate the rate remains fixed for 30 year period and is usually recommended for those people where they decide to built the house with the help of the loan and stay there for a long period. It is commonly believed that lenders reduce the interest rate in a 30 year fixed rate mortgages than in a 15 year fixed mortgage rate.
The Adjustable Rate Mortgages or ARM is where the loan rate remains fixed for a period of time for example for a annual rate mortgage the rate remains fixed for one year and adjusts according to the prevailing rate. This is the most common mortgage facility as the interest rate reduces when the rate index falls and the borrower is at an advantage because of the same. Balloon Mortgages are where like the ARM or Fixed Rate Mortgage the amount remains fixed for a period of time and when the period is lapsed the rest of the amount is paid accordingly.

The above-mentioned mortgages or loans are usually used while building and selling a house. Whereas the ARM or the Adjustable Rate Mortgage is a prevalent type of loans that the lender might apply in any other types of loans.