Borrowed money can be used for many purposes, from funding a new business to buying your finance an engagement ring. But with all of the different types of loans out there, which is best—and for which purpose? Below are the most common types of loans and how they work.

  • Personal loans and credit cards come with high interest rates but do not require collateral.
  • Home-equity loans have low interest rates, but the borrower’s home serves as collateral.
  • Cash advances typically have very high interest rates plus transaction fees.