Everything You Should Know About Loans in the US

Loans in the US

Most of us take advantage of the loans market at some point in our lives. There are many different types of loans, from student loans to mortgages. In this guide, we’re discussing the things you should know about loans in the US and how the industry operates.

Whether you need payday loans for bad credit or long-term lending such as a car loan, there is bound to be some sort of financial product for you out there. If you are applying for a loan for the first time, the terms explained in this guide are important to understand.

Qualifying for Loans

A loan is not like a product you will decide you are going to have. It is something you have to apply for, and this means you need to “qualify” for the loan.

Every lender has its own set of criteria for applying for lending and whether or not someone is likely to qualify. For example, you might have to prove a certain level of income to prove that you are able to repay the loan.

This is the point at which your credit score comes into play. A credit score is managed by agencies in the US, and lenders and banks can report on your conduct. You are given a score based on reliability and whether you are seen as much of a risk. Higher scores are better.

You might qualify for a loan with a poor or fair credit score but you are less likely to get the best rates.

Fees and Interest

Don’t take out a loan unless you fully understand interest. This is a payment made on top of your loan repayments, worked out as a percentage. For a $1,000 loan you can end up paying far more back as interest. Some types of loan have better interest rates than others, and as we’ve stated, you might qualify for better rates if you have a history of repaying loans on time.

As well as this, the lender can apply fees:

  • Application fee – this is charged for the arrangement of the loan.
  • Processing fee – another type of administration fee
  • Origination fee – the cost of organizing the loan, usually on larger sums or mortgages
  • Annual fee – a flat fee paid once a year.

Fines can also be charged for repaying late, or for repaying early! Because an early repayment can cause the lender to miss out on cash, they might make up for this by charging you another fee.

Rules are different in every state, so be sure to check your local state law.

The Term of The Loan

The term applies to the length of time the money is borrowed for. For example, a 5 year term means you will repay every month for those 5 years.

The longer the term, the more interest tends to be applied, the total cost of the lending is therefore more.

If you are looking to take out lending as a payday loan the term might be as short as days rather than years.

Personal Loans vs Other Loans

Depending on your circumstances you might be able to take out a certain type of loan. For example, if you are looking to start a new business then you might be able to take advantage of a specific business loan.

Students may also have access to student loans, while military personnel might be able to get loans based on their active service.

Most of the loans you will look for are just simple personal loans. This means that you are liable for the repayment. Some business loans can be issued specifically to the business, meaning you aren’t personally responsible.


No, this doesn’t mean who is guarding your money. Security for a loan means providing an asset to “guarantee” the loan. If, for some reason, you are unable to pay back, the bank or other lender can come and claim these items as their own, which can be sold to raise the money you owe.

For example, if you are looking to get a car loan, and you have a savings account with the bank or building society, they might ask you to use this account as security. If you don’t repay as planned they may be able to dip in.

For a payday loan, you might be able to use a check as your security, based on the fact that you will have the money to pay it back as soon as payday rolls around.


The loan industry in the US is huge. Not many people can go through their life avoiding taking out a personal loan of some description. The more you know and understand about loans, the more likely you are to get a good rate, and the less likely you are to get in any sort of trouble by not repaying the lending.


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