If you’re in financial trouble, you might need a personal loan. There are many kinds of personal loans. The easiest way to know which one fits you best is to evaluate the various types.
If you choose incorrectly, it may cost you financially. Read on to learn more about six personal loans that may be right for you.
Where to get a loan
Getting a loan from the right place can help you overcome financial difficulty without too much strain. Platforms such as LoanPro serve as a lending core throughout the loan lifecycle. They also assess your needs and ensure you get what you’re in the market.
Understanding types of personal loans
A personal loan is money you can borrow from a financial institution for individual needs. You can obtain a personal loan from online lenders, credit unions, and banks. You may use such a loan for things like:
- Covering a financial emergency
- Carrying out home renovations
- Consolidating debt
- Planning a wedding
You agree to pay the borrowed amount back in installments and with interest. There are a variety of personal loans that you can qualify for.
Secured personal loans
For secured personal loans, you must provide an asset as collateral. An example of collateral is your car.
Such a loan may be suitable if you have a low credit score but also have something to serve as collateral. However, there’s a disadvantage to secured personal loans. The lender can remove your asset from your possession and sell it if you don’t make loan payments. Selling it will help the institution get back its money.
Unsecured personal loans
While trying to get your finances in order, you may opt for an unsecured personal loan. It doesn’t need you to put up collateral to get the money.
Such a loan is best for those with good or exceptional credit scores. A downside to it, however, is that you’ll pay higher interest because the lender takes on greater risk.
Fixed-rate loans are loans with a constant interest rate over the repayment period. Thus, you’ll pay similar monthly amounts for the entire loan term.
Many personal loans are also fixed-rate loans. It’s easy to work the loan repayments into your expenditure plan since it stays constant.
The interest rate on variable-rate loans fluctuates. So, your monthly payment can rise or go down. It all depends on the benchmark rate set by banks.
Variable-rate loans are suitable if they carry a short repayment period. That’s because rates are unlikely to fluctuate wildly in the short term.
Debt consolidation loans
Debt consolidation loans bundle different loans into one. Thus, you’ll have only one monthly payment. Consolidating loans helps you save on interest. It also streamlines loan repayment and lets you get out of debt faster.
Co-signed and joint loans
You may not qualify for a personal loan by yourself. Thus, the lender may approve the loan if you have a co-signer. Such a person must have an excellent credit history. They also take responsibility for repaying the loan if you default. However, a co-signer can’t access the funds.
For joint loans, both parties have access to the money. Both borrowers are also responsible for loan repayment.
Now that you understand the different personal loans, you can choose the best one for your needs.