Types of loans: a complete guide to choosing the right one

You need money for a medical emergency, a car repair, or an expense you did not see coming. You are not sure which type of loan fits your situation. According to TransUnion data (Q1 2026), Americans carry $277 billion in personal loan debt across 26.4 million accounts. It is a massive system. If you are wondering what types of loans exist, navigating it without clear information can feel overwhelming.

According to the Federal Reserve (2025), 12% of Hispanic adults are unbanked, often because the financial system was not designed with our community in mind. Many of us grew up with tandas (informal rotating savings groups common in Latino communities), with loans between family members, with the trust of a handshake. That is not a weakness: it is real financial experience. Formal loans in the U.S. follow different rules, and knowing what types of loans are out there gives you the power to make better decisions.

In this guide you will learn about the different types of loans, their advantages, their risks, and which one works best for your situation.

The most common types of loans

Personal loans

A personal loan is an unsecured loan with a fixed amount, a defined term, and predictable payments. You do not need to put your car or your home up as collateral.

They are the most versatile option: you can use them for medical emergencies, home repairs, unexpected expenses, or debt consolidation. According to LendingTree (2026), 53.1% of borrowers use personal loans to consolidate debt or refinance credit cards. The average personal loan balance is $11,768 per person.

Advantages:

• No collateral required
• Fixed, predictable monthly payments
• Funds available in days, not weeks
• Some fintechs accept applicants with an ITIN

If you are facing an unexpected expense, a personal loan from a responsible lender can be the most direct way to resolve it. Find out where to apply for a personal loan. Kiwi offers personal loans you can apply for 100% from your phone, with a soft pull that does not affect your credit score.

Subject to credit approval. Loan amounts may vary by applicant's state of residence.

Mortgage loans

A mortgage is a loan backed by the property you are buying. It is probably the largest loan you will ever take on, with terms of 15 to 30 years. Interest rates on mortgages can be fixed or variable, and that decision affects your monthly payment for decades.

Within this category there are several types:

• Fixed-rate: your monthly payment stays the same for the entire term
• Adjustable-rate (ARM): the rate can go up or down after an initial period
• FHA: backed by the federal government, with lower down payment requirements
• VA: available exclusively to veterans and active-duty service members
• USDA: for eligible rural areas

If homeownership is a goal, look into FHA programs. Some mortgage lenders accept an ITIN, which opens doors many people assume are closed. Availability varies by state and lender, so ask directly.

Auto loans

An auto loan uses the vehicle as collateral. If you stop making payments, the lender can repossess the car.

Used cars typically come with higher rates and shorter terms than new ones. Getting a pre-approval from your bank or credit union before visiting the dealership gives you stronger negotiating power.

What to avoid: "buy here, pay here" lots. These dealerships target people with limited credit history and charge significantly higher rates. They may seem like the easiest option, but the total cost of the loan ends up being much more.

Student loans

Student loans finance college or vocational education. There are two main categories:

Federal loans (from the U.S. government):

• Direct Subsidized: the government pays the interest while you are in school
• Direct Unsubsidized: interest accrues from day one
• PLUS loans: for parents or graduate students

Private loans (from banks or online lenders):

• Generally require an SSN and credit history
• Do not offer income-driven repayment plans
• Do not qualify for forgiveness programs

Exhaust every federal option before considering private loans. Federal loans offer protections that private ones do not. Without an SSN or eligible immigration status, your access to federal loans is limited.

Payday loans and other high-risk loans

Payday loans, title loans, and pawn loans share one trait: fast access to cash at extremely high costs.

According to the Federal Reserve (2025), 10% of Hispanic adults used some form of payday, pawn, or title loan in 2024. Nationally, 6% of all U.S. adults used these non-bank credit products.

Why they are dangerous:

• According to the CFPB, effective annual rates (what is APR) can exceed 300% or 400%
• They are designed to create renewal cycles and ongoing debt
• Title loans put your vehicle at risk

They fill a real gap. When you need $200 today and you do not have access to a bank or your credit score is low, a payday lender will not ask for extensive documentation. The problem is not that they exist. It is that they are often the only visible option.

More responsible alternatives: personal loans from regulated lenders, credit unions, and fintechs that evaluate your actual financial behavior. Kiwi offers personal loans as an alternative to these high-cost products, with a 100% digital process and no origination fees.

Subject to credit approval. Loan amounts may vary by applicant's state of residence.

What other articles do not tell you

Tandas are not loans, but they teach financial discipline. Tandas and cundinas are informal rotating savings groups where members contribute a fixed amount on a schedule and take turns receiving the full pool. If you have participated in one, you already understand the commitment of paying on time and the power of community trust. That experience matters. The difference: formal loans offer legal protections (state regulation and rate caps) that tandas do not. It is about knowing when each option makes sense.

With an ITIN you can access more options than you think. Many Latinos assume that without a Social Security Number they cannot apply for any loan. The reality is different: among the types of loans that exist, some personal loan lenders, FHA mortgage programs, and credit unions accept an ITIN. The barrier is almost always a lack of information, not a lack of eligibility.

The interest rate is not the only cost. When you compare loans, also check origination fees, late fees, and prepayment penalties. The loan that looks cheapest is not always the one that costs you least in the end.

Compare the total cost, not just the monthly payment. A low monthly payment over a long term can cost you significantly more than a higher payment over a shorter term. Learn how to calculate the interest rate to compare options objectively. Here is an example:

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Note: This is a fictional example for illustrative purposes. The amounts, APR, payments, and costs shown do not represent actual offers, rates, or terms from any lender or service provider.

The $108 payment looks more comfortable. But you end up paying $324 more. Always ask for the total cost of the loan before you sign.

Watch for the fine print in a language you do not fully understand. Some lenders advertise in one language but write contracts only in another. You have the right to understand what you are signing. If the contract is not available in your preferred language, ask for a detailed explanation of every term before you agree.

Frequently asked questions

How many types of loans are there?

More than 8 common types: personal, mortgage, auto, student, payday, title, pawn, and lines of credit. Each one has subtypes. The right type depends on what you need the money for and your current financial situation.

What are the types of bank loans?

The different types of bank loans include personal loans, mortgages, auto loans, student loans, and lines of credit. Credit unions offer similar products, often with better terms for their members. Fintechs expand access beyond traditional banking, especially for people with limited credit history.

Can I apply for a loan without a Social Security Number?

Yes. Some lenders accept an ITIN for personal loans, FHA mortgages, and credit union loans. Check the requirements for personal loans for more details. Availability varies by lender and state. Kiwi accepts applicants with an ITIN in select markets.

Subject to credit approval. Loan amounts may vary by applicant's state of residence.

What type of loan is best for an emergency?

Personal loans from responsible lenders are usually the best option. Avoid payday loans. Consider the amount you need, the term, and the total cost. For smaller emergencies ($150 to $3,000), a short-term personal loan can resolve the situation without creating a debt cycle.

What is a fixed vs. variable interest rate?

A fixed rate means your monthly payment does not change for the life of the loan. A variable rate can go up or down based on market conditions. A fixed rate is more predictable; a variable rate may start lower but carries risk. For short-term personal loans, a fixed rate is almost always the safer choice.

Is a bank loan or a fintech loan better?

It depends on your situation. Banks have established infrastructure but stricter requirements. Fintechs offer faster approval, more flexible criteria (such as ITIN acceptance), and a digital experience from your phone. Learn about the advantages of online personal loans.

How do I avoid predatory loans?

Red flags: advertising "no credit check," pressure to sign immediately, hidden fees, and APR above 36% (the threshold the Military Lending Act uses as a protection cap). Ask for the total cost in writing. Verify the lender is licensed in your state. The Consumer Financial Protection Bureau (CFPB) publishes free guides about your rights at consumerfinance.gov. If it seems too easy, it probably has a catch.

Key takeaways

• Knowing the types of loans helps you make smarter financial decisions.
• Personal loans are the most flexible option for handling emergencies.
• Avoid payday loans: their real cost is much higher than it appears.
• With an ITIN you can access personal loans, mortgages, and more. Get informed first.
• Always compare the rate, term, fees, and total cost before you sign.

When an unexpected expense hits, the right information makes all the difference. #ConKiwiResuelves

Apply with Kiwi

Subject to credit approval. Loan amounts may vary by applicant's state of residence.