Whether you need to consolidate debt, pay off your credit cards, or finance something a little more exciting, a personal loan is a smart way to get cash fast. Personal loans are quick, secure, offer low interest rates.
Well, if you choose the right one.
So, what are the different types of personal loans and how can you be sure that you’re securing the right one for you? Let’s find out.
Keep reading to learn everything you need to know to make the right decision. Let’s dive in!
What Are Personal Loans?
It’s important to start with the basics. A personal loan is a loan that is typically for an amount of anywhere between $1,000-$100,000. Personal loan terms vary depending on the lender.
So, why do people decide to take out personal loans? Here are some of the most common reasons:
- To buy a boat, car, RV, or any other vehicle
- To consolidate existing debt
- To take a trip
- To move
- To cover funeral expenses
- To pay medical bills
- To pay for a wedding or any other event
- To finance a home remodel
- To pay off credit card debt
Whatever the reason is, a personal loan is a simple way to get funds at a reasonable rate. Now, let’s break down the details of the different types of personal loans that lenders most commonly offer.
Unsecured vs. Secured Types of Personal Loans
An unsecured loan is a loan without any collateral, making them a higher risk for lenders. Small unsecured personal loans are usually approved based on information like your credit score and annual income.
Secured loans are loans with collateral. For example, a mortgage is a secured loan, as is a car loan.
Fixed Rate vs. Variable Rate Loans
Fixed rate loans are the most popular method for personal loans. These loans carry the same rates throughout the full term on your loan, so your payments stay the same.
Variable rate loans are based on a benchmark created by banks. These loans make the most sense if your payment plan is short-term, like a personal payday loan.
What’s the Best Type of Loan?
The best type of loan is from lenders who take a unique approach. Look for an option with competitive rates and fixed terms.
The optimal personal loan will not have an origination fee nor a prepayment penalty. And, a trustworthy lender should offer flexible verification options. For example, you should be able to show your income rather than your credit score, if that works best for you.
The Bottom Line
Personal loans are a great option for individuals who need a lump of cash quickly, for a big purchase or expense. As you can see from the options above, there are lots of different types of personal loans to choose from.
If you would like to take a loan out, look for trusted lenders with reasonable rates and fixed terms. Enjoy the financial freedom that a personal loan can offer!
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