Basic Knowledge: Understanding Various Types of Personal Loans

Personal loans image 848484There will be a time in your life that you’ll experience a financial crisis, and applying for a personal loan is an excellent way of getting out on that kind of financial situation. A personal loan can be a lifeline to those people who are experiencing financial problems. However, one must know that it’s not always easy to get a loan.

For starters, you need to consider what type of loan are you looking for, or what’s the most suitable loan for your situation. If you’re deciding to apply for a loan, you should keep in mind that there are particular requirements for getting various kinds of loans. But if you’re looking for the best choice, then a personal loan could be your saving grace.

Personal loans are an excellent choice, especially if you’re looking for a long term solution with lower rates. You can get a personal loan with reasons such as for education fees, new house, and even for holidays. However, before getting a loan, you need to analyze the situation and assess if you’re making the right decision. Here’s a list of personal loans that could help you.

Secured Personal Loan

A secured personal loan requires something as collateral. For you to borrow money from a lender or a bank, they need you to put up an asset as security. This is for them to ensure that the borrower must pay what they owe. If you borrowed from a bank, they might get your house, car, and even types of jewelry as collateral.

Giving a collateral item means the lender can have the authority of your asset if you fail to pay the amount of debt you have. The best thing about a secured personal loan is that you can enjoy lower fees and interest rates because the lender has less risk. You can check out some current personal loans such as Credit ninja in the market to help you with your concern.

Unsecured Personal Loan

Unlike a secured loan, the unsecured personal loan doesn’t need any collateral from their borrowers. Instead, it only supports and issues borrowers by their creditworthiness. You can obtain signature loans or unsecured loans without risking something from your property or other assets to become collateral.

If you ever decided to apply for an unsecured loan, you need to make sure that you have a high credit. Therefore, having a high credit means more chances for approval. The rates of an unsecured loan typically range from 5% to 30%, with repayment terms from one to seven years.

Fixed-Rate Personal Loan

Fixed-rate personal loans have fixed rates of interest. If you’re an employee, this type of loan could be your best choice. This way, you don’t have to worry about getting higher interest rates as the other types of loans. If you apply for a fixed personal loan, you can make the same payments until you repay your loan.

Moreover, it’s much easier for you to handle fixed rates than paying for higher interests. The only downside of a fixed-rate personal loan is that if the rates drop, your interest will stay the same because interest rates do not affect the overall rate. It may put you into a situation where you’re paying more of what you’re supposed to pay. Therefore, you need to be fully aware of your financial status.

Student Personal Loans

Student loans are one of the most basic types of loan. Everyone must have experienced becoming a university student, and one of the most common problems of college students is money. Fortunately, there are a lot of lending institutions that offer student loan. This type of loan can be a huge help for a university student.

In addition to that, if you’re still a student, this type of loan can help you lower your stress level, especially when it’s about financial problems. Student loans can help you purchase a new laptop, textbook, pay for your tuition fee, etc. The best thing about this type of loan is that you can pay it as long as five years, and some banks don’t offer fees when applying for a student loan.

Debt Consolidation Personal Loan

A debt consolidation loan is one of the most helpful personal loans to people who have multiple debts from different lenders. Applying this type of loan can save you a lot of stress as you won’t have to think about the obligations you have to pay. If you borrowed money from your friends, family, or if you have to pay for your utility, and credit card bill, then it’s better to consolidate all of that into one.

You can apply for a debt consolidation loan to pay off your debts in a single payment. Instead of serving different loans, you can just concentrate on paying one personal loan. The good thing about loans is that you can pay them through equated monthly installment.

But, before applying for this type of loan, you need to make sure that you’re on the right lending company as some companies offer high-interest rates, and that could be a problem.

Takeaway

A financial crisis is one of the most common problems  people are facing today. Some people may be fortunate enough and don’t need to worry about their money and expenses, but for some, it can be difficult making a budget when you’re always short.

Applying for a personal loan is no joke. You can’t easily get the money you’re trying to acquire, especially if your reason is unacceptable. However, if you succeed in applying for a loan, make sure you evaluate all the possible loans you can get. You have to the fees, monthly payment, and interest rates. This way, you will be able to get the help you wanted.