You feel that it’ll take you forever to save enough money to buy the latest large screen TV or washing machine. So, to get it now, you’re considering getting a personal loan. Your only concern is that you’ve no idea how personal loans work.
You don’t understand the differences between various types of personal loans. And you fear taking out the wrong loan, which you struggle to repay. Besides, you’re concerned about the total cost you incur when you take out a given personal loan.
To help you out, here are the different types of personal loans that exist today.
Secured Personal Loans
When getting a secured personal loan, you’ll be required to provide an asset to be used as collateral. Some lenders may ask for your car or home title. The lender, therefore, has the power to take possession of this asset if you default on the loan repayment.
The great thing about secured personal loans is that most lenders charge low-interest rates. The reason is that an asset backs the loans, so the lender carries a low risk. So, look for online resources that guide you more on how secured personal loans work.
You want to learn here what you can use as collateral for these loans and how to apply.
Unsecured Personal Loans
On the other hand, unsecured personal loans don’t require you to have any collateral when applying for them. That means that the lenders carry high risk, so most of these loans have a high-interest rate. The key thing most lenders check when offering unsecured personal loans is your credit score.
So, to qualify for these loans, you need to have a positive credit score. That’s why you should seek resources to guide you on how to improve your credit ratings. Understand that having a good credit score helps you achieve access to cheap unsecured personal loans.
Payday loans are designed to make it easy for people to access emergency cash. So, these short-term loans, which you’re meant to pay once you receive your paycheck. In addition, these loans are a bit expensive, and you should only use them when in need of emergency funds.
Besides, shop around to see the rates different payday loan lenders charge. You want to find a lender who charges reasonable rates for these loans. Besides, you’re looking for a lender who’ll approve the loan fast and disburse the money quickly.
Pawn Shop Loan
To raise emergency cash fast, some people choose to get pawnshop loans. These people use their valuable items such as jewelry or electronics to secure these loans. The problem is that these loans tend to have extremely high-interest rates.
So, adopt smart budgeting techniques to minimize the need to get these loans.
Access Funds With Ease by Understanding Different Types of Personal Loans
Knowing different types of personal loans makes it easy to borrow money. The reason is that you’ll go for a type of personal loan that best fits your needs. Besides, you’ll know the key things to check when comparing various types of lenders.
Learn more Personal Finance tips by checking out our other blog posts.