As you gain more independence entering into adulthood, the necessity of loans and insurance becomes more of a reality. While you may know about student loans, it’s also important to know about other types of loans that can help you pay for things like cars or housing in the future, while understanding your various insurance options that can protect you from unexpected expenses. Here's what you should know about shopping for loans and insurance. 

*Note: Before making any big financial decisions, we strongly advise you to talk to a parent/guardian or a trusted adult. They can help you make informed choices about taking on debt that can ensure your financial stability and success in the future.

Loans

Taking out a loan can be a helpful way to finance your expenses, but it's important to understand the terms and conditions of any loan before taking it on. Make sure to compare different lenders and shop around for the best interest rates and fees. A key thing to consider with any loan is to look at the total loan amount plus the total interest and decide if whatever you are trying to buy is worth that. While loans can help you invest in your future, it's important to ensure that you are not living beyond your means or the money you have in the bank. Being smart about your debt and keeping your credit score high are keys to long-term financial health.

Read more below about three common loans that you might need as you get your first job, go through college, and enter adulthood.

Car Loans

A car loan is a loan that you take out to buy a car. These loans are usually offered by banks, credit unions, and car dealerships. When you take out a car loan, you will need to make regular payments over a period of time, typically 2-5 years. The amount you’ll need to pay will depend on the loan amount, interest rate, and length of the loan. Car loans are considered “secured loans,” because if you aren’t able to pay them back, the lender can take back what you bought– in this case, your car. Your car in this example would also be called “collateral.” This makes it so the lender feels secure in lending the money.

When considering a car loan, it's important to research different lenders and their interest rates. You should also factor in the cost of insurance, maintenance, and repairs when calculating how much you can afford. A car is not just a one-time expense, but an ongoing investment that requires regular upkeep.

Another factor to consider is whether to get a new or used car. New cars are generally more expensive, but may have better fuel efficiency and come with a warranty. Used cars, on the other hand, may have higher maintenance costs but can be more affordable up front.

Personal Loans

Personal loans are another type of loan that can be used for a variety of purposes, such as paying off credit card debt, paying for expenses at school not covered by student loans, or covering unexpected expenses. Unlike car loans, personal loans are “unsecured,” meaning you don't need to put up collateral (like a car) to secure them. However, because they are unsecured, personal loans often have higher interest rates than secured loans.

Before taking out a personal loan, it's important to assess your financial situation and determine whether you can afford the monthly payments. You should also compare interest rates and fees from different lenders to find the best deal. Be wary of lenders who advertise "no credit check" loans, as they often come with high interest rates and fees.

Rental Loans

If you are struggling to pay rent, a rental loan may be an option to consider. Rental loans are short-term loans that can help cover the cost of rent when you are experiencing financial hardship. These loans are typically offered by nonprofit organizations or government agencies and often have low interest rates and flexible repayment terms.

Before applying for a rental loan, it's important to talk to your landlord or property manager about your financial situation. They may be able to offer a payment plan or work with you to find a solution that works for both parties. If you decide to apply for a rental loan, make sure to read the terms and conditions carefully and understand the fees and interest rates involved.

Insurance

Many things that you may need a loan to pay for also come with insurance. Insurance is a protection from large expenses that may come up later. Sometimes insurance is a requirement by law and sometimes it is something you may seek out for security and peace of mind. Read more about three common insurance plans you may come across.

Car Insurance

Car insurance is required by law in most states and can help cover the cost of damages or injuries in case of an accident. The cost of car insurance varies depending on several factors, such as age, driving record, and type of car. Liability insurance is the minimum coverage required by law and covers damages to other people and their property. Comprehensive and collision coverage can provide additional protection for your own vehicle and medical expenses.

When shopping for car insurance, it's important to compare rates and coverage options from different insurers. Make sure to ask about discounts that may be available, such as safe driver discounts or discounts for students with good grades.

Health Insurance

Health insurance is another important type of insurance to consider. Without health insurance, a single medical emergency can quickly become a financial burden. Health insurance can help cover the cost of doctor visits, hospital stays, and prescription medications.

If you are under 26 years old, you may be eligible to stay on your parents' health insurance plan. If not, you can purchase health insurance through the Affordable Care Act (ACA) marketplace or receive it through your employer if it's offered. When selecting a plan, make sure to consider the premiums, deductibles, and co-payments, as well as the coverage for specific services that you may need, such as mental health or dental care.

Rental Insurance

If you are renting an apartment or house, rental insurance can provide protection for your personal belongings in case of theft, fire, or other disasters. Rental insurance can also provide liability coverage in case someone is injured on your property.

When selecting rental insurance, consider the cost of the premiums and the coverage limits. Make sure to read the policy carefully and understand what is covered and what is not. Some policies may have exclusions for certain types of losses, such as floods or earthquakes, so it's important to assess the risks in your area and consider additional coverage if needed.

Financial independence can come with some complexity, but educating yourself now can set you up for future success! Have any questions? Text #Jobs to 33-55-77 to chat with one of our advisors or check out our free Money Management resources.