These Are the Most Common Types of Personal Loans
Are you looking to take out a personal loan? The great thing about personal loans is that they’re versatile, the interest rates are decent, and you don’t need to offer any collateral to qualify for a loan.
But, before you take out a personal loan, it’s important to understand the different types available.
Read on to learn about the different types of personal loans.
1. Secured Personal Loan
A secured personal loan is an installment loan that involves offering collateral, such as a car, savings account, or another type of asset. If you default on the loan, your lender can seize the asset you offered as collateral.
Because of the collateral offered, secured loans are less of a risk for lenders, which means they usually come with lower interest rates. Additionally, lenders are usually more flexible with credit score requirements, so this is one of the best loans for bad credit.
2. Unsecured Personal Loan
With an unsecured personal loan, no collateral is required to qualify for the loan. As we mentioned, with a secured loan, you could offer your car as collateral, and if you don’t pay back the loan, your car will be repossessed.
In order to back up the loan, you’ll need to have a solid credit history, and you may need to get a consignor. Typically, you’ll need a credit score of at least 679 to qualify for an unsecured personal loan.
While unsecured personal loans can be great for boosting your credit, they can also severely harm your credit if you don’t pay the loan back on time.
3. Fixed-Rate Personal Loan
Personal loans are typically fixed-rate loans, which means the interest rate will stay the same for the term of the loan, as does your monthly payment amount.
The great thing about a fixed-rate loan is that you’ll know exactly how much you owe each month. There won’t ever be any surprises. For those who like to set up their budget ahead of time, this type of loan is a great option.
4. Adjustable-Rate Personal Loan
Some lenders also offer adjustable-rate personal loans. Rather than working with a fixed interest rate, the interest rate with this type of loan is subject to change over time.
Also known as float-rate loans or variable-rate loans, adjustable-rate personal loans come with low interest rates. After a certain period of time, the interest rate may increase depending on the conditions of the market. This means that your monthly payment can go up and down.
Luckily, there are usually caps in place to prevent the interest rate from jumping too high.
Type of Personal Loans: Are You Ready to Take Out a Loan?
Now that you know about the different types of personal loans, it’s time to decide which one is right for you. With the right loan, you’ll be able to get the money you need in a short period of time.
For more loan tips and tricks, be sure to check back in with our blog.