If you don’t have enough money to meet the needs of your daily life or if you want to continue some business or some project and you don’t want to draw on your savings, you may apply for a loan. There are a lot of projects and needs for which you can apply for a loan which includes urgent school fees, moving costs, home renovation projects, medical bills, or even a holiday trip to some other country to enjoy with you family. Personal loans are available from different banks and other lenders and these aren’t secured against any kind of asset such as your home.
1. Basics of Personal Loan:
A personal loan delivers a one-time payment of cash to the people which are in need of money. Then, they have to pay back that amount along with interest in regular, monthly installments over the lifetime of the loan. On larger balances, the banks or other lenders usually charge a lower rate of interest when it is compared with a credit card or any other forms of credit. The interest rate which is usually paid at the end of the month is usually fixed but not always. You can even choose how long you’d like to take to repay the loan with interest.
2. Types of Personal Loans:
Almost all personal loans are unsecured and have fixed payments but there are also some other types of personal loans but the loan which suits best for you is depends on the factors including your credit score and the time which you need to repay that loan. The different types are as follow.
3. Unsecured Personal Loans:
An unsecured loan is a loan that aren’t secured against any kind of asset such as your home Instead of depending on a borrower’s assets as security, lenders approve unsecured loans based on a borrower’s credit score. Examples of unsecured loans include personal loans, student loans, and credit cards.
4. Secured Personal Loans:
These loans are backed by collateral which means that the banks or any other lender let you borrow the money against the value of an asset such as your car and home. Secured personal loans may carry lower interest rates but theses loans carry a risk but are less risky for the lenders.
5. Fixed-rate Loans and Variable Rate Loans:
Almost all personal loans carry fixed rates and these loans are those in which the interest rate will remain the same through the life of the loan. If you want consistent payments each month then fixed rate loans suits best for you. A floating interest rate, also known as a variable or adjustable-rate loans. Fixed rate loans are better because variable rates can change monthly or quarterly in response to economic conditions.
6. Debt Consolidation Loans:
A debt consolidation loan is a type of personal loan that can assist you combine different high-interest debts into one new loan, ideally one with a lower interest rate and this loan can help you save money on interest and get out of debt faster.
7. Co-sign loans:
This loan is for those with zero credit score and with no credit history. A co-signer promises to repay the loan if the borrower with zero credit score doesn’t, and acts as a form of insurance for the lender.