Types of Loans in the U.S.

Mortgage Loans (Home Loans)

Purpose: Used for purchasing a home or real estate.
Loan Types:

• Conventional Loans: Not insured by the government.

• FHA Loans (Federal Housing Administration): Insured by the government, ideal for first-time homebuyers with lower down payments.

• VA Loans: Exclusively for veterans and active-duty military.

• USDA Loans: For rural and suburban homebuyers.

Auto Loans

Purpose: For financing the purchase of a car or other vehicle.
Loan Types: Secured loans (the car itself is collateral) or unsecured loans (less common for car purchases).

Student Loans

Purpose: Used to finance higher education, including tuition, books, and living expenses.

• Federal Student Loans: Available through the U.S. government with lower interest rates and deferred payment options.

• Private Student Loans: Offered by banks, credit unions, and other private lenders.

Personal Loans

Purpose: Unsecured loans for a wide range of expenses (medical bills, home renovations, debt consolidation, etc.).

Credit Cards

Purpose: Revolving credit for everyday purchases, offering short-term borrowing.

Down Payments (Deposit Requirements)

A down payment is an upfront payment required to secure a loan, especially for large purchases like homes and vehicles. Here are the common down payment ranges:

Mortgage Loan Down Payments:

• Conventional Loans: Typically 5-20% of the home’s purchase price.
• FHA Loans: 3.5% down payment if your credit score is 580 or higher.
• VA Loans: No down payment for eligible veterans.
• USDA Loans: No down payment for eligible buyers in rural areas.
  

   

Auto Loan Down Payments:

• Typically 10-20% of the vehicle’s price, though some lenders may require as little as 5%.

Personal Loans and Credit Cards:

• No down payment required, but be aware of interest rates and other fees.

Loan Terms (Repayment Period)

The loan term refers to how long you have to repay the loan. Typical loan terms are:

Mortgage Loans

• 30-year fixed-rate loans are the most common. You can also get 15-year and 20-year options, which usually have lower interest rates but higher monthly payments.

Auto Loans

• Typically range from 36 months (3 years) to 72 months (6 years). A shorter term may result in higher monthly payments but less total interest paid.

Personal Loans

• Typically 2 to 5 years (sometimes 7 years), but shorter terms are available for specific needs.

Student Loans

• Federal student loans have terms typically ranging from 10 to 25 years, depending on the repayment plan.

Credit Cards

• These are revolving credit, meaning there’s no set term—balances must be paid off monthly or as agreed, but interest is charged on any unpaid balance.

Interest Rates

The interest rate is the cost of borrowing money, expressed as a percentage of the loan. Here are the typical interest rate ranges:

Credit Score and Credit History

For most loans, your credit score will be a major factor in your eligibility and interest rate. The U.S. uses a scoring system ranging from 300 to 850.

If you are new to the U.S. or a refugee without a credit score, it can be more challenging to get a loan, but there are still options. In these cases, lenders may look at other factors like your income, job stability, and assets.

Documents You’ll Need

To apply for most loans, you’ll need to provide several documents, including:

• Proof of Identity (e.g., passport, driver’s license, or government-issued ID)

• Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)

• Proof of Address (e.g., utility bills, lease agreements)

• Proof of Income (e.g., pay stubs, bank statements, tax returns)

• Credit History (if available)

• For mortgages, you may also need to show your employment history, assets, and debts.

Loans for Refugees and Immigrants Without a Credit Score

If you are an incoming refugee or immigrant and do not yet have a credit score, there are still financial options available to you. Here are some key resources and options for building credit and securing loans:

Options for Building Credit

• Secured Credit Cards: These cards require a deposit, and the deposit becomes your credit limit. Using them responsibly can help you build a credit history.

• Credit Builder Loans: Some financial institutions offer small loans designed to help individuals build credit. The loan amount is held in a bank account while you make payments, and it’s reported to the credit bureaus.

• Co-Signer Loans: If you have a trusted friend or family member with a good credit score, they may co-sign the loan to help you qualify.

Resources and Loan Options for Refugees and Immigrants

• World Relief: A nonprofit that offers financial education and assistance to refugees and immigrants, including support in applying for loans and credit.

• Accion Opportunity Fund: Provides microloans and business loans to underserved communities, including refugees and immigrants, without credit histories.

• The International Rescue Committee (IRC): Offers financial services to immigrants, including programs to help refugees build credit and access financial resources.

• Citi Secured Mastercard®: A secured credit card option that can help you start building credit with minimal requirements.

• Self (formerly Self Lender): Provides a credit-building tool where you can apply for a credit-builder loan with no credit score required.

Final Tips for Newcomers

• Start with a secured credit card to build your credit history.

• Make timely payments on any loan or credit account, as this will help improve your credit score.

• Track your credit score through free services like Credit Karma or by checking your credit reports annually at AnnualCreditReport.com.

• Avoid borrowing too much: Taking on too much debt can harm your credit score and financial stability.

• Consult with financial advisors or local community organizations to guide you in navigating loans, especially if you’re new to the country or don’t yet have a credit score.

Useful Resources

• AnnualCreditReport.com – Free access to your credit report from the 3 major credit bureaus.

• Credit Karma – A free service to monitor and track your credit score.

• Accion Opportunity Fund – A nonprofit providing loans and financial support to underserved populations.

• World Relief – A nonprofit that offers financial education and services for refugees and immigrants.

• Citi Secured Mastercard® – An option for starting to build credit.