Different Types of Loans
There are many reasons why a person may need to ask for a loan; for instance, maybe they are trying to grow their company or maybe they need to keep their company afloat during a difficult time. Whatever the reason, loans can be very helpful, as they can help the person to each their personal and financial goals. Loans, however, can be tricky. This is because there are so many types of loans, and each one has its benefits, as well as setbacks. Since there are so many options, people often ask their Fairfield County attorney for advice. Nonetheless, this article introduces some of the common loans. (Related topics: unitranche CT lawyer, first lien debt CT attorney)
First Lien Senior Secured Loans
Senior loans are the first loans to be repaid before other loans. Since these loans have a lower risk, they have lower interest rates.
Second lien Loans
Second lien loans, otherwise known as subordinated debt, have a lower priority than senior debt. Since these loans are higher risk than senior loans, they also come at a higher interest rate.
Unitranche loans combine senior debt and subordinated debt. By doing so, the interest rates will be set between the normal rates for senior debt and subordinated debt. This is becoming a popular choice, as the borrower will only need to borrow from one financial institution, making the process less complicated and cost-efficient.
A revolving loan allows the loan to be withdrawn, repaid, and redrawn again at any amount of time until the arrangement expires. In many cases, borrowers use this loan for working capital. Borrowers like this loan because it is very flexible and great when unexpected expenses occur.
Unlike the revolving loan, term loans borrow a specific amount and have a set repayment schedule. This type of loan is often used to purchase real estate.
Every loan is different; which loan is right for you depends on your personal situation and what you are planning to do with it. This article gives a brief introduction of different loans, but your Fairfield County attorney can better help you choose which loan you should get.