What Type of Personal Loan Do You Need? You’ve Got Options
Life is rough. We all have multiple bills, payments, and responsibilities. It’s easy to fall behind on payments and end up owing more money than what you have. When you think all hope is lost, understand that you still have options.
A popular option is a personal loan. A personal loan is a sum of money that you can use for your own personal needs. Because it’s a loan for personal reasons and not for a specific purpose, there’s no collateral or down payment required.
When you do a search for a personal loan, you’re shocked at how many options you have. If you’re trying to find the best type of personal loan online, continue reading and know your options.
Breaking Down the Best Type of Personal Loan
All of these loans are under the category of personal loans but each differs. Here are your personal loan options.
Secured Personal Loans
Secured personal loans are one of the few types of personal loans that require collateral. But as the loan is based on the value of the collateral, these are no credit check loans. Additionally, the interest rates are lower than for comparable loans and since there’s less risk, you’re more likely to get approved.
What should you use as collateral? Examples include your car, personal savings, and any other asset.
Unsecured Personal Loans
Without collateral, unsecured personal loans are riskier for lenders. That’s why they’re harder to get and often come with high annual rates. The rates can be anything between 5% and 36%.
Your approval and your annual rate are based on your credit score. Repayment is between one and seven years.
If you’re looking for a loan that has a low-interest rate (especially if you have a poor credit score), you’ll want to look into a variable-rate loan.
The interest rate on these bad credit loans isn’t based on your credit score. Rather, they’re based on a benchmark rate that the bank sets.
This has its advantages and disadvantages. The rate varies with each month. Some months, your rates and payments will be low and other months your rates and payments will be higher.
Don’t worry – don’t expect too high rates and payments. Many personal loans no credit check have a maximum monthly rate and payment amount. But it’s important to know the maximum before signing up for a loan.
Fortunately, variable-rate loans will have a lower APR than other personal loans. But it’s still best you only take out a variable-rate loan if you plan on repaying it short-term. This will help save you money and keep your interest rates low.
Unlike a variable-rate loan, a fixed-rate loan has the same interest rates and monthly payments for the duration of the loan. These are easier to pay off and can be more affordable in the long run.
This is the best option for those with good credit scores who can get a small rate and monthly payment on the loan. Since your rates and payments are consistent, this is the best option for those who plan on taking a longer repayment period.
Do you need a loan but have a less-than-perfect credit score? A co-sign loanhelps you get a great loan, even with poor credit. Someone with a great credit score, such as a family member or a spouse, will co-sign on your loan.
Co-sign loans also help you get a lower rate and relaxes some of the repayment conditions.
The co-signer acts as a responsible party for the loan. They promise the lender they will repay the loan if the borrower can’t.
Debt Consolidation Loan
Do you have debt in all directions? A debt consolidation loan takes multiple debts and combines them into one loan. Rather than stretch yourself thin by repaying multiple debts off, the loan combines your repayment into one monthly payment.
Debt consolidation loans have lower APR rates, helping you save on interest.
Personal Line of Credit
A personal line of credit is more similar to a credit card than a traditional loan.
You gain access to a credit that you use whenever you need. Rather than pay back a huge sum of cash, you only pay back what you spent and your interest rate only applies to how much you spent for that month.
Since these are similar to a credit card, it’s best to take out a personal line of credit for smaller or emergency purchases.
Credit Card Cash Advance
If you already have a credit card, you can use your credit card to take out a cash advance. This is convenient if you can’t get a loan. However, it can get expensive. That’s because interest rates are usually high, even by credit card terms. As an example, your regular credit card interest might be 19.99%, but your cash advance interest might be 26.99%.
You’ll also have to pay a fee when you take cash out of your credit card. These fees can be as low as $5 or as high as 5% of your deduction. And normally, the interest starts to accrue immediately, so anything you’ve already charged on your card will start to cost you.
Do you have an emergency purchase that you can afford, just not right now?
Many borrowers opt for a payday loan. You only receive the amount you typically receive from a normal paycheck. Once you get paid next, you start repaying the loan.
Keep in mind that payday loan online repayments are short-term and you may have to pay a huge chunk off every month. They’re also risky for lenders, which is why many only assign them with high interest rates.
Do You Need a Personal Loan?
Taking out a loan is never fun. But if you know you need a personal loan, you should know the best type of personal loan for your situation.
Weigh the pros and cons of each type. Know your credit score, your finances, and how much you can afford.
See if you’re willing to put up collateral for a more affordable and less risky loan. You’ll have to repay the loan, so this is a decision that requires a lot of thinking.
Did you decide which type of personal loan you want? We offer many types of personal loans. Here are some other articles you might find interesting:
Your guide to payday loans online no credit check
Payday loans with a prepaid debit card – how to get one when you only have a debit card
How to get no credit mattress financing
Why Avant credit is a great choice for debt consolidation