A personal loan is a loan given by a bank or credit union where the borrower pays back the loan in fixed monthly payments; often over two to five years. Keep in mind; most personal loans are unsecured; that is, they are not backed by collateral. Many take out a personal loan to pay for tuition for college, starting a business, paying off debt, home renovations and maintenance or a personal emergency.
Types of personal loans
To be clear, there are two types of personal loans; unsecured loans and secured loans. Unsecured loans are loans that do not need collateral. Forms of collateral would be your car, home or other personal property. Because there is additional risk with this kind of loan, interest rates are higher. Secured loans are loans that require collateral.
Examples of secured loans
Several examples of secured loans are home equity loans and home mortgages. Secured loans have lower interest rates. Other types of personal loans are fixed rate personal loans, variable rate loans, installment loans, lines of credit, credit cards and short term loans.
What benefits does a personal loan offer?
Keep in mind; there are several benefits of personal loans such as lower interest rates, can be used for a variety of reasons and can be used to consolidate debts. If you have good credit, most personal loans come with lower interest rates. What makes personal loans attractive to many is that they can be used for a variety of reasons such as buying a new car or redoing your home. If you have debts that have been mounting up, taking out a personal loan can be a lifesaver. Consolidating debts with a personal loan can save you money on interest and pay off debts faster with less worry.
Tips and suggestions when applying for a personal loan
There are some tips that may help before signing up for a personal loan such as first making sure that a personal loan offers you the best deal. Banks, credit unions and online lenders offer personal loans. Do some research and find a lender who can offer you the best deal, one that will meet your needs. Most importantly, be wise when it comes to credit card consolidation. You can check out https://financedistrict.co.nz/loans/personal-loans-no-bad-credit-check/ for some loans options for you.
Be careful not to add to new credit card debt
Personal loans can be a great way to reduce debt; however, it can backfire if you add to your credit card debt. In addition, always read the fine print. Ask for a full disclosure of all the loan terms. Also, be sure to look at your financial situation carefully and how much you can comfortably take on.
To conclude, a personal loan is a loan given by a bank or credit union where the borrower pays back the loan in fixed monthly payments; often over two to five years. Talk with a personal loan officer at your bank, credit union or online borrower soon and secure a loan that will best meet your financial needs.