Types of Personal Loans
The most common personal loan everyone is familiar with is an unsecured loan, but what other options do you have for personal loans? If you recall, an unsecured loan does not require collateral measures but, instead, raises the interest rates in cases of risk. Personal loans range from secured to fix-rate loans, yet not all are fitting to everyone’s needs. Each loan serves its own purpose and may depend on numerous financial factors, including credit score and debt. It is important to know the differences of each personal loan and which is best applied to your circumstances before making any final decision.
Secured Loans
From the name itself, secured loans serve counter to unsecured loans with collateral being its main source of guarantee in payment. Expect to offer your assets, such as a home or vehicle, in case you fail to pay the lender. Its security to lenders provides reassurance you will not default on your payments, and if so, the lenders are giving liberty to repossess collateral.
Fixed Rate Loans
As the name suggests, fixed rate corresponds to a secure and stagnant monthly rate through the entire span of the loan. If you love consistency and a simpler way to budget, fixed rate loans may be the most appealing method for you. Keep in mind for fixed rate loans considering it’s mainly placed on a long term basis in payments.
Variable Rate Loans
Variable rates generate fluctuating interest rates set as a standard amount by the bank. No need to worry about the inconsistency of interest rates since some may follow a cap that limits to how much your quota could be. If you prefer to benefit in maximizing your potential savings and attain it in a shorter period of time, variable rates may be the best route for you.
Single Payment
Rather than compensating for multiple loan payments, single payment loans allows you to pay the entire balance left to cover in a large amount by the maturity date of the loan. The perks to maintaining a single payment plan is no longer dealing with the hassle of various debt payments due in different times and, instead, financing a simpler management program.
