A personal loan is a fixed amount of money that you borrow with a fixed rate of interest and repay within a fixed length of time. To have a personal loan first you better figure out what you will do with the money. Then you can compare rates, loan amounts, terms, and conditions before deciding what type of loan is suitable for you. Here read on 8 types of personal loans that you can consider.
1.Unsecured personal loans
Most of the personal loans are unsecured personal loans. It doesn’t need any collateral to secure and the application process is quite fast. On the other hand, you require a good credit record to qualify for the loan and the interest rates are high. It may vary from 5% to 36% and repayment terms in 1-12 years depending on your credit record and the purpose of the loan.
2.Secured personal loans
Secured personal loans are backed by collateral that’s why it is less risky for the lender. This means if you fail to repay the loan, the lender can seize your collateral. Secured loans are offered at lower interest rates. The loan amount depends on the collateral you are using, and the rates ranged from 5%-12%.
3.Cosigner personal loans
A cosigner personal loan is a type of unsecured loan that you will apply with your partner. Both you and your partner will be responsible to pay back the loan. If you have poor credit to apply for a personal loan but your partner has a good credit record, you can qualify for the loan. Like unsecured loans, the interest rates and payment terms are the same and vary depending on you and other applicant’s credit history.
4.Fixed rate personal loans
Most personal loans are offered at fixed interest rates. Fixed interest rates are generally applied to installment payments. Your rates and monthly payment remain the same throughout the life of the loan. The most common type of fixed-rate loans is auto loans and mortgage loans. Auto loans offer 7%-15% within one to five years term. Whereas mortgage loans offer 2%-5% interest and for long terms up to 40 years.
5.Variable rate personal loans
This type of personal loan is offered at variable rates that can change depending on the economic condition. Interest rates are renewed usually in a three months period. That can often go down than the fixed rate but also with the risk of increasing if the economy turns downward. Most variable-rate loans are offered at a low rate to attract the borrowers but with the range of maximum rate which could happen in the lifetime of the loan. Usually, the rate fluctuates between 5% to 36%.
6. Personal line of credit
A personal line of credit offers you to borrow money whenever you need it. It is the same as credit cards where you have a credit limit and only pay the interest for the amount you borrow. You must pay it back on a regular monthly basis. Once you pay back you can again borrow money. The interest rates are also low. It remains within 7%-14%. However, you must maintain a good credit history to get access.
7.Debt consolidation loans
Some lenders offer personal loans that are planned only for debt consolidation. It allows you to combine all your loans to a single loan which can simplify your debt by offering you a monthly payment system. Interest rates naturally stay between 8% to 28%.
8.Payday loans
Payday loans are usually less than 1000$ and short-termed and high rated too. Different states have different rules on payday loans. Generally, payday lenders charge 15$ to 20$ for every 100$ you borrow. You must pay it in 7-14 days. That turns the Annual percentage rate up to 500%.
