A personal loan can help you with countless things. You can consolidate credit card debt, get a little cash to take a vacation, or buy a big-ticket item.
Personal loans are the fastest-growing type of debt. That’s because they are easier to get and tend to have a lower interest rate than credit cards.
If you’re thinking about getting a personal loan, you need to know which type of personal loan is the best for your situation.
Read on to find out which option is the best for your needs.
What is The Personal Loan For?
The first thing you need to figure out is what the loan is for and how much money you need. There are different types of loans for certain situations. Some are to finance a home or a car. Others are small-dollar loans to help you through a tough time.
Check Your Credit Score
Most lenders will look at your credit score before approving you for a loan. You need to know where you stand before you apply for a personal loan. If you have a fair to poor credit score, you might only have a few lenders to choose from.
Video – What is Your Credit Score?
Finding the Right Type of Personal Loan
Once you know where you’re at financially and what you’ll use the loan for, it’s easier to figure out what type of personal loan is best for you.
Here are the most common types of personal loans:
Secured Personal Loan:
This is common for large loans or for people with bad credit. These loans are secured by some kind of collateral, like your home or your car. If you default on the loan, the bank can claim that property.
Unsecured Personal Loan:
This is a personal loan not secured by any personal property. However, if you are late or default on the loan, you’ll take a hit on your credit score and have to deal with the collections process.
Line of Credit:
This works similar to a credit card. This is an amount of money that you can borrow from. When you borrow money, interest accrues until it’s paid back in full. This is good if you frequently make larger purchases and then pay the balance in full each month.
Quick Cash Loans:
It’s becoming more common to have a financial shortfall. You might not have enough cash to pay bills or get groceries until your next paycheck. A quick cash or payday loan is a small dollar loan paid back when you get your next paycheck.
Once you know which type of loan is right for you, you can check out this source for loans and apply.
Get the Right Personal Loan
If you’re in a situation where you need to finance a purchase or pay off debt, a personal loan can be the way to go.
You need to know which type of personal loan is right for you. The wrong personal loan can result in higher interest payments or hurt your credit score.
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What is a personal loan? Definition and Examples