Taking a personal loan can be your only option when tough times come knocking. There are different lenders willing to give you this type of loan, and the biggest relief is that you can now apply online.
There are different things to keep in mind before taking a personal loan. These are your financial needs, credit score, and the repayment period. Unlike other loan types, getting a personal loan is easy and doesn’t subject you to many restrictions; hence, the best option for an emergency.
There are many types of personal loans that you can get online. If you want to learn more about these types, read through.
Unsecured Loans
This is the easiest and the most common type of personal loan you can get online. This loan isn’t backed by collateral. You don’t need to stake your car, home, or any of your assets to get this loan. Because of zero security, personal unsecured loans tend to charge higher interest rates.
The lenders use your credit score to determine whether to give you a loan or not, and at what interest rates. If you have a strong credit score, you will most likely get a higher loan amount with lower rates than when your creditworthiness is questionable.
The repayment period for these types of loans goes between one and seven years, depending on the amount you get.
Secured Types of Personal Loans
This is the opposite of the unsecured loans. In this case, you’re required to produce collateral to get a loan. You can secure a loan with your home, autos, or any valuable asset you have in your possession. If you default, the lender will seize your property to cover up for the loan.
Lenders view secured loans as less risky, and this means low interest rate for the borrower. Other types of secured loans are car loans (secured by your car), mortgage loans (secured by your house), payday loans (secured by your salary), and personal savings loans.
Fixed-Rate
Fixed-rate loans mean your rates and monthly payments will be the same until you clear the loan. They are the best personal loans for those concerned about rising rates of long-term loans and consistent payments.
This type of bank loan makes it easy for you to budget for the payment since you understand the amount you’re needed to pay for a specific period without additional charges.
Variable Rate
This is the opposite of fixed-rate, and the amount of interest and monthly payment for this loan keeps changing. This type of loan starts with low interest rates subjected to monthly fluctuations. The lenders set the benchmark rates for this loan, and you’re to adhere to that.
Your monthly payment can rise or fall depending on the total monthly payments, interest costs, and the benchmark fluctuation rates.
Variable-rate loans have lower APRs than fixed-rate loans. They can also come with a cap limiting how much the rates can change during the life of your loan. They are the best personal loans to consider for short term loans.
Debt Consolidation
This is a loan taken to refinance existing debts to form a new loan. You can take a debt consolidation to roll up multiple debts into one loan. They have a lower interest rate than that of credit card debt and carry a lower APR than your existing debts.
This is a perfect way to save on interest rates, and you can even pay everything in a single month. It is also an excellent way of simplifying debt payment since you’ll be combining all debts into a single loan.
Co-Signed Loans
This involves applying for a loan with a co-signer and can fall under types of unsecured loans or secured loans. A co-signer loan can help you get a loan without any credit history or when your credit score is too low.
You can get a person who qualifies to get the loan to apply on your behalf. If you default the loan, your co-signer will be responsible for the payment.
A co-signer can be your friend, family member, or someone you have close relationships with. Their names are usually included in the loan so that they are equally liable for the loan.
To increase your chances of qualifying for the loan, you need to get a co-signer with a strong credit score. This will also mean lower interest rates and favorable repayment terms on your side.
Personal Lines of Credit
This loan is similar to a credit card loan as it revolves around credit. For this loan, you will not be getting a lump sum but rather a credit line. The creditor sets a maximum credit limit, which once you reach, you can only borrow after you finish the payoff.
The loan is not only limited to credit cards but gives you other options such as wired transfers, ATM withdrawal, and checks.
Another difference between the personal line of credit loans and credit card loans is that the former have lower interest rates. Personal lines of credit have both secured and unsecured loans.
Credit Card Cash Advances
This involves borrowing against cash advances. You have different options for securing credit card advances. You can borrow from a credit union, withdraw from an ATM or a credit card, and request cash directly from a credit card company.
Credit cash advances are not always the best personal loan options to consider because they tend to have very high rates. You will also need to undergo additional credit card fees when doing the transactions.
You should consider checking the disclosure terms before proceeding with these types of consumer loans.
Pawnshop Loan
This is a secured personal loan that you get against a valuable piece of assets. It can be jewelry or an electronic that you leave in the pawnshop and get the money.
Pawnshop loans have very high-interest rates, and the owner can sell your property after the expiry of the loan period. These loans do not affect your credit score, but you risk losing your property.
Choose Your Loan Wisely
Taking a personal loan depends on your circumstances. You should take your time to study and understand these types of personal loans, their interest rates and risks, among other things, to help you make an informed decision.
Take a look at our website to learn more about our loan services, educative blogs, and contact us for a more personal approach to understanding your loan options.
