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You might not know this, but there are actually a variety of different loan options for you if you’re looking to borrow money. And as you start to compare loans, you’ll quickly notice that your credit is usually a big factor. It’s going to help determine if you get approved and the terms of your loan, including the interest rate.
But what are the best loan options available? Continue reading and we’ll walk you through everything you need to know!
1. Unsecured Personal Loans
Personal loans are extremely common and can be used for all kinds of reasons. Whether you’re consolidating your debt or trying to pay for a wedding, a personal loan can come in handy.
If you choose to get an unsecured personal loan, then you won’t be putting any collateral (like a car or house) on the line in case you default on the loan. If you happen to have high-interest credit card debt, then you might be able to pay off that debt sooner with a personal loan.
If you want to consolidate your debt, then you can apply for a personal loan in the amount that you owe in credit card bills. If you get approved for that amount of money, then you can take that loan and use it to pay off your credit cards.
Depending on your credit score, a personal loan might get you a lower interest rate than your credit card. And a lower interest rate means more chances for saving money.
2. Secured Personal Loans
A secured personal loan is a lot like an unsecured personal loan. The main difference is that this time you have to put up some kind of collateral.
This can be something like a car or a house or even a certificate of deposit. This is needed in order to secure the loan.
The benefit of getting a secured personal loan is that you’ll get a lower interest rate than an unsecured personal loan because there’s collateral involved. This makes this kind of loan less risky for the lender.
If you’re sure that you can pay back the loan and don’t mind putting up the collateral, then a secured personal loan can be an ideal loan option.
3. Payday Loans
A payday loan is a high-cost, short-term loan that’s usually due by your next payday. In order to repay your loan, you’ll usually have to authorize the lender to withdraw the amount you borrowed automatically, including any fees or interest or, straight from your bank account. You also might have to write a post-dated check.
Payday loans tend to be for $500 or less. You may want to get a payday loan if you need some quick cash and don’t have access to cheaper forms of credit or you don’t have savings to draw from.
4. Title Loans
If you own a car, then you might be able to get a car title loan. You can usually borrow between 25 percent and 50 percent of your vehicle’s value. You’ll typically need to pay the title loan back within fifteen to thirty days.
If you don’t pay the loan back in time, your car might get repossessed.
A title loan usually comes with a high APR that can be in the triple digits. If you get approved, you’re going to have to hand over the title to your vehicle until you pay back the full amount of the loan, plus interest and fees.
If you own a car and don’t have access to other lines of credit, then a title loan might be the best way for you to get money that you otherwise wouldn’t be able to get.
5. Pawn Shop Loans
Most people wrongly assume that a pawn shop is simply a place where individuals go to sell items. And then that store sells the items at a higher price. In reality, pawn shops mainly deal with lending.
A pawn shop loan can be a great way to get cash quickly. Essentially, you take an item that has value, like a musical instrument or a car, and you give it to the pawn shop in exchange for cash.
You usually have thirty days to repay the loan and interest. If you don’t pay back the loan in time, then the pawn shop gets to keep your item and they can sell it in their shop.
If you can’t qualify for another kind of loan and happen to have some valuable items in your possession, then a pawn loan can be a useful option.
6. Home Equity Loans
A home equity loan is a kind of secured loan where your house is used as collateral in order to borrow a lump sum of cash. The amount that you can borrow will be based on how much equity you have in your house.
You usually can’t borrow more than eighty percent of the equity that you have in your house.
The Importance of Knowing About the Best Loan Options Available to You
Being in need of cash is never a fun situation. But by knowing about what the best loan options are, you can make more confident and educated decisions about your finances. Just make sure that you’ll have enough money to pay the loan back in time.
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