Personal Loan Basics - 3 Common Loan Types
At some stage in life most of us have needed to apply for a personal loan. The biggest hurdle is where to get the best deal. With so many options available to you here are some helpful pointers to guide you in applying for the right personal loan. Payday Loans: A payday loan is perhaps the easiest to quick cash. This type of personal loan is very convenient as it can transfer the money into your checking account within the same day. Usually, the cash limit on this personal loan can be as much as $1,000, while other more stable credit facilities can go higher.
However the interest rate on this type of personal loan could soar as high as 30 percent, and require you to repay the loan amount within two to three weeks. The maturity date can run longer, but the longer its maturity, the higher its interest expense will be. Secured Personal Loans: A secured loan is the personal loan that can leverage the largest possible amount you can borrow. Usually, this type of loan is used to fulfill a need that requires higher capitalisation such as buying a car, or booking a holiday. As the name demonstrates a secured personal loan requires a security against the borrowed money.
Security in the form of a valuable asset or property, also known as the collateral. A collateral is something of greater value than the desired loan amount such as your car, your house, or land that you own. One of the advantages of a secured personal loan is getting the best possible deal. Because you are providing security of value against the loan you will generally get a more competitive interest rate, and better repayment options. Unsecured Personal Loans: On the other hand, there are several types of unsecured personal loans in the market. An unsecured personal loan means that you do not need to provide collateral against the loan. This type of personal loan comes with high interest rates as the lender is taking on more risk than a secured loan. Generally only people with good credit ratings will be offered the option of going unsecured as they have a proven record of good credit history. As you scout for a personal loan that suits your needs be very inquisitive to the smallest detail of the terms and policies. There is a wide range of service charges, interest rates, and penalty clauses that should be considered first.
Make sure you go around and check various offers before you finalise your application.
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