Are you in need of a quick influx of cash? A personal loan can be a way to get cash for a variety of reasons. You can consolidate credit card debt in a lower interest rate loan, finance a vacation, or start a business.
If you do an online search for personal loans, you’ll find a lot of options. You should know the different types of personal loans and how you can get approved.
Keep reading to learn what you need to know about personal loans.
Secured Personal Loan
A secured personal loan is usually necessary for high-dollar or high-credit risk loans. Lenders want to protect their investment as much as possible, so they’ll ask you to put something up as collateral in case you default on the loan.
A mortgage is a secured loan. Same with a car loan. With these loans, if you default on your payment, the lender will take possession of your car or home.
Payday loans are small-dollar loans that are paid back in a short amount of time, usually when you get your next paycheck. People turn to these types of personal loans when they are short on cash to pay for basic expenses.
The thing to watch out for with payday loans is the fees. Payday loans have interest rates as high as 700%.
Before you take out a payday loan, make sure you can pay the loan back with fees in full. Otherwise, you’re going to have to take out a new loan (with more fees) to pay off your old loan.
Unsecured Personal Loan
An unsecured personal loan is a loan that doesn’t require collateral. You just get the loan and make installment payments every month. These are common when you want to pay for a vacation or consolidate debt.
What happens if you don’t pay back it back? Your credit score will be damaged, and you will go into collections. Since there isn’t collateral to secure the loan, you can expect to see a higher interest rate than you would for a secured personal loan.
Online Personal Loans