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Did you know that American’s personal debts have escalated 20% from a decade ago?
Although the last thing you might want is another loan, personal loans have many uses. The more educated you are about personal loans, you can take a better grasp of your finances.
Read on to learn about the types of personal loans available.
Unsecured Personal Loans
Unsecured loans are one of the most common types of personal loans because they don’t require collateral. While other loans require collateral such as your car or home, unsecured loans will allow you to borrow without putting your assets on the line.
However, keep in mind that the interest rates might be slightly higher because they don’t require collateral. Expect to pay between 5% to 36% in interest, depending on your credit score.
Secured Personal Loans
Unlike unsecured personal loans, secured loans will require collateral. If you default on this personal loan, the lender has the right to take whatever you put down as collateral, such as your home or car.
Because there’s collateral involved, you can expect interest rates to be lower on this type of personal loan.
As the name suggests, the interest rates of variable-rate loans fluctuate with the market. If the market’s interest rates rise, so will your monthly payments and interest rates.
You can typically expect lower interest rates with variable-rate loans, especially if the loan is short-term.
With a fixed-rate personal loan, you can expect the interest rates to stay the same throughout the life of your loan.
Most personal loans are fixed-rate loans, which means your monthly payment will always stay the same.
Debt Consolidation Loans
If you’re dealing with multiple debts such as credit card and you want to consolidate, debt consolidation loans are the right choice.
These loans will allow you to pay off all of your outstanding debts, and keep only one monthly payment. Many people choose to apply for a personal debt consolidation loan because the interest rates are lower than a typical credit card.
Co-sign loans are perfect for borrowers who have bad or no credit history. Getting a co-signer will allow them to qualify for a loan that they wouldn’t qualify for themselves.
By adding a credit-worthy co-signer, will let lenders know someone will be responsible for the loan. However, if you cannot get a co-signer, you can apply for a personal loan for people with bad credit. If you want to learn more, read this guide on how to apply for a no credit check personal loan.
Personal Line of Credit
A personal line of credit is more similar to a credit card than a personal loan. Instead of getting a check for a lump-sum of cash, you will have access to a credit line.
It means you will only have to pay interest on the amount you borrow, not the entire loan.
Check Out These Types of Personal Loans
Now that you know about all these types of personal loans, it’s time to decide which one is right for you.
Some of the most common types of personal loans include secured, unsecured, fixed-rate, debt consolidation, etc.
If you enjoyed this article and would like to read more financial tips, check out the rest of our blog.