subject: Explore The Personal Loan Option That Is Best For You [print this page] It doesn't have to be secured by any assetsIt doesn't have to be secured by any assets. In fact, personal loan recipients use the money for "general purposes". There are two main types of personal loans. Secured personal loans, as this suggests, a secured personal loan is backed by collateral. This may be a home, a boat, a car or another financial asset.
Lack of repayment will result in repossession of the property. If you secure a loan with a home and can't repay, you could lose your home to foreclosure. An unsecured personal loan is not secured by anything other than the signature of the recipient. It's usually based on general creditworthiness.
Because it's unsecured, the lender will charge a higher interest rate because of the additional risk. If not repaid, the lender would resort to legal claims to make good on the loss. Secured or unsecured personal loans can be obtained via banks, credit unions, loan companies at brick and mortar places or online.
Following are eight personal loans you might be able to obtain on a secured or unsecured basis. Home Equity Personal Loan - If you have enough equity on your home, you might be able to get a personal loan secured by your home equity.
Advantages of a home equity loan are that the interest rates are lower because the money is secured by your home, you may be able to borrow a larger amount, the payback term will be longer, the payments may be lower.
A major disadvantage of using your home's equity as a personal loan, of course, is that if you cannot repay, you could lose your home to foreclosure. Again, if you have enough equity in your home and don't want or need all the money at once, you might want to consider a personal line of credit secured by your home.
Major advantages of this approach are: you only pay interest on the amount you borrow, you have control over how and when you use the money, the payments are interest only, so they're usually lower.
If you can't repay the line of credit, you could lose your home to foreclosure. Short term personal loans have the following two characteristics: High interest rate- This is because repayment period is so short.
And small loan amounts- Many online companies will only loan up to $1500 for a short term loan. Banks don't offer more than $15,000 or $20,000. Collateral may also be requested. An example of a short term personal loan is a title loan where you borrow an amount secured by the title to a vehicle you own. If you don't repay, the car will be repossessed.
A cash advance or payday loan might be useful to take care of an unexpected expense. Characteristics of these loans are: they're easy to qualify for. Usually all you need are some paycheck stubs. They have a short term life.
You usually have to pay it back within two weeks. The interest rates are very high. For example, you can pay up to $30 to borrow $100 at some payday loan firms. Military personal loans are offered by military loan companies to assist qualified members of the armed forces in getting money when they need it.
Some characteristics of these are: specific for men and women of the military, low rate of interest, a repayment schedule can be chosen by the borrower, and the money can be obtained even if the applicant has bad credit.
No Credit Personal Loans have the following characteristics: They're designed specifically for people with no credit history, a credit check may not be required, the interest rates may be high.
Make sure you read the fine print and comparison shop for these loans.
If you've run into an unforeseen financial crisis or a personal tragedy, you may be able to get a second chance personal loan: this can be a secured or unsecured loan, collateral (a home) will probably be involved, you will experience a higher rate of interest, shorter payback times and limits on the amount that can be borrowed.
