Types of Personal Loans
Whether you need to consolidate your debt, pay medical bills, or finance another major expense, personal loans are one of the best options on the market. They are widely available and can be used for nearly anything.
Most personal loans are unsecured and have fixed rates; however, while these are the most common, there are other types as well.
So, before you start looking for lenders, be sure to familiarize yourself with the different types of personal loans.
Personal Loans: What are Your Options?
If you’re interested in borrowing money for a major personal expense, here are your options:
● Unsecured: Unsecured means you don’t have to put up any assets as collateral. Meaning, if you’re unable to make your payments on time, you don’t have to worry about losing valuable assets.
● Secured: Secured means that you do have to provide collateral to protect the lender in case you default. This option can help you get lower interest rates but requires you to take on more risk as the borrower.
● Fixed-Rate: This means that your interest rate and monthly payments will remain the same for the entire repayment term, making financial planning much easier.
● Variable-Rate: Variable interest means that your interest rate may change from month to month, meaning your monthly payments will change as well. Rates can go up or down depending on market conditions.
● Debt Consolidation: Debt consolidation products are designed specifically for consumers who need help paying off high-interest debt. You use the borrowed money to pay off other debts and effectively merge all of your debts into one monthly payment.
● Personal Line of Credit: Banks offer personal lines of credit to customers who meet certain requirements. These can be secured or unsecured and work very much like a credit card, meaning you borrow what you need on a revolving basis and only pay interest on the money you actually use.
Which is Best?
As there are several different types available, it can be difficult to choose which type of personal loan is right for you.
Unsecured, fixed-rate loans are by far the most common type and are generally a good option for a borrower with good credit.
The best option depends on your specific needs and circumstances, so be sure to compare rates and quotes from multiple lenders before making a final decision.
Based on a $10,000 loan, excellent credit score with a 14% interest rate on a 1 year term