Getting a personal loan is more common than ever. As prices for everything increase, people have a harder time making payments and putting food on the table. That’s why it’s no surprise that more than 21 million Americans have personal loans.
Do you plan to borrow money in the future and want to learn what your loan options are? Below are several types of personal loans that are worth considering.
An unsecured personal loan is one of the most common types of loan available. It’s available to individuals with good credit histories and no glaring problems with their financial history.
Although unsecured loans are popular among consumers, it’s also one of the most costly. This type of loan doesn’t require any collateral — meaning the borrower doesn’t need to put anything on the line for the loan.
As a result, you’ll see higher interest payments because of the added risk. But if you plan to repay your loan quickly, this is an excellent choice since you can avoid much of the added interest.
There are also many unsecured loan options available, so check out fastloandirect.com to see your options and get a fast loan.
If someone doesn’t have an excellent credit history or no borrowing history, it’s hard to get approved for a loan. Since you don’t have a history to show that you’re a reliable borrower, lenders are much less likely to offer unsecured loans.
A secured loan is for these situations. You’ll offer collateral for the loan in case you fail to make your payments. This collateral can be anything from cars to homes.
However, anybody can still apply for this type of loan. Since there is less risk for the lender, you’ll get a reduced interest rate and the potential for a larger loan amount.
Debt Consolidation Loan
Many people get into trouble by getting into too much debt. They have credit card bills, mortgage payments, auto payments, and more. Much of that debt will have high-interest rates, and you’ll need to contend with different payment amounts.
Debt consolidation loans help people in this situation. You can get a large loan to cover all your outstanding debt. Once you receive the money, you can pay off all your existing debt and focus on a single loan.
Doing this saves most people money in the long term. You’ll have a lower interest rate than credit cards and can use the money you save to pay off your debt faster.
A joint loan is a great option for people with trouble getting other loans. If your history is bad enough, you won’t be able to get secured or unsecured loans. If you don’t have any assets, you also can’t provide any collateral.
In cases like this, lenders need a guarantee from another person. If you have friends or family with a good credit history, they can sign onto a loan with you to help you get the money you need.
Your co-signer guarantees to repay the loan in the event that you fail to do so. If you decide to go this route, make sure you have the resources to handle the repayment to ensure your co-signer doesn’t get stuck with your bill.
Most loans have a fixed interest rate. Most people want these types of loans because they want a predictable monthly payment that doesn’t change based on interest rate changes.
But if you want to make getting a loan easier, a variable-rate loan is an option available to you.
One good thing about this type of loan is that your initial rate is normally lower than a traditional loan. On top of that, your rate is locked in for a fixed time before the lender can change the rate.
If you want a short-term loan, this is a great choice to reduce your interest payments.
Buy Now, Pay Later
A buy now, pay later loan is for people who need to make a purchase and don’t have all the funds available. Instead of paying the cost all at once, you split the payment into smaller installations and pay the loan over several months.
You can usually get these loans through mobile apps. A vendor will sign up for one of these services and extend financing to their customers.
A great thing about these loans is that you don’t always need excellent credit. But if you do have good credit, you can sometimes find zero-interest loans.
Personal Line of Credit
Personal lines of credit are for people who want money available when they need it but don’t want to take out a loan. Instead of getting a lump sum of a loan, you get a credit account you can draw from up to a certain amount.
This means you can make purchases and pay off your drawn credit instead of paying large monthly loan payments. It will reduce the total interest you pay and help you borrow more limited amounts.
If you don’t have any credit or poor credit, secured lines of credit are available. Otherwise, you can get unsecured credit lines.
Consider the Types of Personal Loans Carefully
Looking for the best loan isn’t an easy task. You need to find money to take care of something pressing, but at the same time, you don’t want to sign up for a bad deal. And when many companies are known not to treat their borrowers well, you may put off applying for a loan that you need to avoid those problems.
But that doesn’t mean there aren’t types of personal loans available that offer the cash you need and reasonable repayment terms. Now that you’ve read the guide above, you should know what to look for when you need to borrow cash.
Are you interested in learning more financial tips that will help you set yourself up for future success? Read more financial posts on the blog to learn more.