Understanding Your Loan Options
When it's time to borrow, know what loan type fits your needs.

Everyone faces times when they need a little financial help. Whether it’s for an unplanned for event or the purchase of a big-ticket item, it’s best to know what kind of loan fits your needs. 

Don’t be confused at the loan options available at banks today. A variety of loan products are available with varying borrowing capacities. The main types of loans offered at Skyward Credit Union are: 

• Personal Loans
• Credit Cards
• Home-Equity Loans and Home-Equity Lines of Credit
• Unsecured Line of Credit
• Student Loans

The type of loan you should take out depends on your purpose for the loan, along with the desired length of repayment, your financial capability (i.e., credit score and credit history), and whether you have collateral. Loan terms can be categorically different for each kind of loan. 

To Use Collateral or Not?

Non-collaterally based (unsecured) Loans: Can be used or any purpose and you do not need to specify its end usage to the financial institution. Interest rates are typically higher because higher risk is associated with the loan. This is the safer alternative to a payday loan and, with on-time payment, will help build your credit rating for the future. Types of unsecured loans are:

• Personal loan (also called a signature loan)
• Credit Card/Revolving Debt
• Student Loan

Collateral-based (secured) Loans: Collateral is something of monetary value that is greater or equivalent to the loan amount. When you take out a loan using collateral, larger loan amounts are available because of the value the collateral provides. Interest is also generally lower than on an unsecured loan, because the risk is mitigated using the collateral. Types of collateral-based loans include:

• Auto
• Home
• Home Equity

Loan Terms

Terms refer to the terms and conditions involved when borrowing money. They can include the loan’s repayment period, the interest rate and fees associated with the loan. Additionally, penalty fees might be charged, and any other special conditions may apply. Reviewing loan terms carefully is important for understanding your obligations when taking out a loan. 

Most people focus on monthly payments, and then perhaps interest rates, when borrowing. However, interest rates largely determine your payment amounts when the length of the loan is set. For longer period loans, payments may be smaller unless interest rates are high. The longer term for the loan, the more interest you will pay in addition to the loan principle.

When determining the type of loan to apply for, remember to consider the interest rate as well as the length for repayment, and fees associated with the loan terms (e.g., late payments, etc.)  Some loans, such as an auto or home loan, can be combined with loan insurance to help with unexpected interruptions in repayment. When you get a loan at Skyward, our expert loan processors will inform you on all the details concerning the terms of your loan and will answer all your questions.