As a borrower, you may receive money from a lender, which you will have to pay back later. A loan is provided at a cost, referred to as interest, or annual percentage rate (APR). Continue reading to learn about various types of loan options:

•  Installment loans are loans that are repaid in equal monthly payments within a specific period of time. Installment loans come at a cost. This includes the APR (an interest rate) and the finance charge. Cars, furniture, computers or household appliances can be purchased with installment loans. Fixed-rate loans have an interest rate that stays the same throughout the loan term, while with variable-rate loans, the interest rate can change during the period of the loan.
  
  
• Secured loans imply that the borrower offers a guarantee, or collateral, for the loan. The borrower has a claim on this collateral as a repayment source if a loan is not paid back as agreed.  For example, a home mortgage is a secured loan - the bank loans the majority of the purchase price of the home, but retains a lien against the home for as long as the loan is outstanding. Unsecured loans are loans that are not secured by collateral, such as credit cards. Because the lender holds no collateral, unsecured loans hold significantly more risk for the lender, usually resulting in a higher interest rate.
  
  
• Rent-to-Own Services allow you to rent an item for a period of time, in exchange for weekly or monthly payments. These agreements are not loans, so no interest is charged.  However, while paying overtime, it is likely that you will pay 2 to 5 times more than the cost of the same item at a store.  Furthermore, if you miss a payment you can lose the item and all the money that you have already paid towards owning it!
  
  
• Payday loans are cash advances given in exchange for a written check from your bank account.  Your check is held until your next payday and then cashed.  These loans are costly with a typical fee of $15-$35 for every $100 you borrow.  This might not seem like a lot of money, but imagine that for a $200 loan you agree to pay back $260 in 2 weeks. You pay $60 in interest which is the equivalent of a 782% annual rate!

TIP: Before you take out a loan compare fees and interest rates.  Make sure you understand whether or not the interest rate can change over the life of the loan.  Remember there are alternatives to payday and rent-to-own services. Your community organization, bank or credit union may offer small, short-term loans at more reasonable rates. Paying for an expensive item in three or four installments could save you money! Shop around before you buy and never feel pressured to make a purchase.