Types of Personal Loans

Written by: Lauren Topper

Personal Loans help you get ahead when finances bring you down. Everyone has experienced financial difficulties from time to time. Some of us need extra money to take that much-needed vacation or to use as a down payment on a vehicle. Regardless of the reason for the need for money, personal loans provide the cash just in the knick of time. Many types of personal loans offer cash that can help in your times of financial hardship, regardless of what that means in your life.

What is a Personal Loan?

A personal loan is a type of financial agreement made by a lender and a borrower. This agreement provides the borrower with funds they’ll repay under the lender’s requirements over a specified period of time. An interest fee is added to all personal loans. The amount of interest varies from one lender to the next and according to factors such as your creditworthiness and credit score. Almost all personal loan lenders evaluate your credit report and credit score to determine if you’ll get an approval for the loan and the amount of that loan. The better your credit, the better the odds of getting approved for money.

Types of Personal Loans

Many types of personal loans put cash in your hands in the time of need. Not every loan is suitable for every situation. For example, a mortgage loan will not cover costs to buy a new car. Research the types of personal loans since they each have their own terms and conditions, as well as requirements for approval. Some loans, for example, require collateral be placed on the loan to safeguard repayment, but others do not. Evaluate the amount of interest and the repayment terms before signing on the dotted line for a personal loan. Never get in over your head to get a loan. The end result is unlikely to be very favorable to you in the future.

Among the types of personal loans:

– Secured loan
– Unsecured loan
– Fixed-rate loan
– Variable-interest loan
– Personal Line of Credit

This is not a complete list of the types of loans that provide financial help when you need cash but is a look at the most common of the loans. If you find yourself in need of cash for any reason, could one of the above options come in to help in the time of need?

How to Get a Personal Loan

Once you decide which type of personal loan is best for your needs, completing an application starts the loan process. The application requests information used to determine your creditworthiness and the amount of loan you may qualify to receive. Most loan companies run a credit check on all applicants before approving or denying an application. The loan company will need several types of verification to process your application. This includes proof of employment and income, proof of address, social security number, driver’s license, and other information. Complete the loan application in its entirety and provide all requested information to speed the loan process. Some companies offer loan applications that can be completed online, but others still require that you come into the office to complete the application.

Will I Get Approved for a Loan?

Many factors determine whether or not you get approved for a loan. Take a look at your credit ahead of applying for a loan. Improve any areas that need a bit of help to better the odds of getting loan approval. It’s ideal to compare your options and do a bit of research before completing any loan applications. Some loans are reserved for people with excellent credit, others designed more for people struggling to rebuild their credit. Learn more about the types of loans that may help you out the financial situation that you are in to choose the best option. Keep in mind that every lender also sets forth their own criteria and stipulation for approval, so when one lender says no, the next may very well say yes. It’s up to you to do the research ahead of time to find the right lender for your personal loan needs.

Facts to Remember

Many types of personal loans provide cash when you need money or when it’s time to make a major purchase. Consider the different loan types, evaluate the pros and cons of each, and the loan purpose to choose the best. Also, keep in mind that loans impact your credit from the moment you apply for the loan until the second that it’s repaid in its entirety (along with the interest rates.)

Only apply for a personal loan if you’re confident that repaying the loan won’t become difficult. Job loss or other factors could make repaying the loan difficult, if not impossible. Defaulting on a personal loan creates a mess with your credit and sends you quickly spiraling into debt. It’s the last frustration you want burdening your shoulders. And, of course, use a loan only if it’s needed.

While we’d all love to take lavish trips, own luxury cars and yachts, and live upscale lives, attempting to live beyond our means is the fastest way to debt and headaches than you’d probably rather avoid. Live within your budget, use loans only when financially wise and when financially secure, and, of course, make sure to repay the money that you borrow from any lender.


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Types of Personal Loans

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