US consumers owed $323 billion in personal loans in 2020. People borrow money for everything, from buying a home or car to consolidating debt. They could even take out money for wedding or funeral expenses.
The type of loan you take out will depend on what you want the money for. Check out these types of personal loans to determine which would be the solution for your financial needs.
Unsecured and Secured
An unsecured loan is one that’s not secured with collateral. This would be a physical asset the lender could take possession of when you fail to repay your loan. An unsecured loan is riskier for a lender, so they typically come with higher interest rates.
Secured personal loans have more security for the lender because they can recoup their money should you fail to pay. An example of this would be a personal loan for a vehicle, where the vehicle is the collateral for the loan. These loans typically have lower interest rates.
Fixed-Rate and Variable Rate
Fixed-rate loans have installment payments that stay the same for the loan’s entire life. The majority of personal loans have this type of repayment setup.
Variable-rate loans follow a benchmark rate that gets set by the banks. This means the interest rate can change, which will cause your monthly payment to fluctuate throughout the life of the loan.
A debt consolidation loan is different from other types of loans. You borrow money to repay other debts owed. This is common when you have high credit card balances. You take out the loan, pay off the credit cards, and then have a single monthly payment.
The idea is to reduce the total amount you pay by securing a debt consolidation loan with a lower interest rate. Online lenders like loanz.com can process and approve applications within minutes.
Co-signed and Joint
If you cannot secure a loan on your own, it can be useful to have a co-signer. This is when a borrower has someone else agree to sign the loan with them. Then, if the borrower fails to pay, the lender can go after the co-signer to repay the loan instead.
Sometimes, you may not need the assistance but have stronger borrowing power as a couple. For example, this often happens when a married couple decides to purchase a home.
Buy Now and Pay Later
A type of loan that has recently become more popular is a buy now and pay later loan. These are small consumer loans that people take out when shopping online. You make the purchase today and then make smaller monthly payments.
These loans don’t require good credit or proof of income so that you can get approved during the e-commerce checkout process.
Consider These Types of Personal Loans
If you need a financial boost, then one of these types of personal loans could be the solution. Perhaps you co-sign for a secured loan with a fixed rate to purchase a home. Or you take out a debt consolidation loan to reduce your credit card debt.
Get your finances in order by taking out your own personal loan and checking out our other finance articles.