What Type of Personal Loan Is Right For You?
August 1, 2019 (Investorideas.com Newswire) If you are looking to make some investments, start your own business or just need some quick emergency funds, you are probably thinking about taking out a personal loan. But, how do you know which loan is right for you? With so many products available, it can be difficult to wade through the options.
The type of loan that you end up with will be largely dependant on how much you need to borrow and the health of your credit score. Consider your personal situation and what you are looking to finance before you start looking into different types of loans.
Borrowers often have a long list of questions when it comes to getting the right loan. Are secured loans safer than unsecured loans? How long does it take to get a title loan? What style of loan has the most flexible repayment terms?
Before you commit to anything, it's always best to do your homework when it comes to your finances.
Secured & Unsecured Loans
A secured loan is also referred to as a collateral loan. This means that you will be putting up an asset against the amount of money that you want to borrow. For example, if you need to borrow money quickly you may want to put your car up against the loan amount. The value of your vehicle will often secure a loan for a similar amount.
These loans carry much less risk for lenders. If you struggle with credit issues or need to establish credit, this is a good option.
Traditional lenders like banks and credit unions offer a wide range of unsecured loans. These loans do not require you to put up any collateral against your amount. Your loan is granted on the basis of your credit and your ability to make repayment. These loans will often come with slightly higher interest rates but often have more flexible repayment terms, often from one to seven years.
Fixed & Variable Rates
With a fixed rate loan, once your terms are agreed upon they will not change for the duration of your loan. This means that the interest rate that you have will not change, and your payment installments will remain the same. These types of loans are better for anyone that likes to stay on a budget and knows what to expect with each payment.
This style of loan may appear a bit riskier but can work to your advantage for short term loans. The interest rate will fluctuate with the benchmarks set by your lender. This means that your interest payments can go up or down at any time. For longer term loans this can make a huge difference in your overall repayment amount. The advantage is that variable loans often carry less stringent APR requirements, making them better for anyone struggling with a lower credit score.
It can be scary to think about taking out a loan for any amount of money, so it's best to be informed before making any formal agreements. Knowing the basics of lending principles will allow you to make the best decision on what kind of loan is right for you.
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