Young people, just starting out on their own, will probably need to take out a loan, at some point. They may need to borrow money to purchase a car or a home. When they do, many will feel overwhelmed because although they may be knowledgeable about loans, they’ve never had the responsibility of choosing a loan. Other individuals won’t be familiar at all with loans. For these individuals, the stress of learning about loans, in addition to choosing one, can result in additional feelings of pressure. Fortunately, with a little research, it’s possible to learn all that one needs to know in order to make an intelligent decision.
The best loans for young people will vary, based on the individual and what the loan is for. For instance, a person on a limited budget, interested in purchasing a home, may find that either an interest-only or traditional home loan is best but for different reasons. A traditional loan is good simply because a person knows exactly how much their mortgage will cost each month. There aren’t any surprises in this regard, which can be nice for a person is on a fixed income.
An interest-only loan might be good for people that aren’t making a lot of money at the present time but who believe they will be earning significantly more in the next few years. By the time the terms of the loan changes and the borrower begins to pay both interest and principle, they would hopefully, have a higher paying job and thus be able to afford it.
The appropriate loan for someone young will depend on the individual’s income, the type of loan they want and their willingness to take risk. Two good options for home mortgages are interest-only and traditional loans. Both offer different and distinct advantages that young borrowers may especially benefit from.