If you think a Personal Loan is one size fits all, we have news for you. There are various types of loans out there, and some kinds are best suited to your needs, history, and future goals. Which is the perfect fit for you? Get a great head start on the ideal personal loan by checking out these five types.
- Cosigner loan.
Before applying for a personal loan, do your homework. First, check your credit report. Next, use an EMI calculator for personal loan to estimate how much you’ll owe monthly on the amount you’d like to borrow.
If your credit history is poor, look into a cosigner loan. This type of loan allows you to sign up alongside someone with great credit, which can increase your shot of getting approved. Just bear in mind that if you don’t pay on time, the lender will go after your cosigner for the money. Students with little credit often get their parents to cosign such loans for schooling expenses.
- Payday loan.
In recent years, payday loans have emerged as a fast, easy way for people to get cash, often for emergency expenses, like car and home repair. But there are some definite trade-offs. Usually, you’re expected to pay off the total amount you borrowed within a short period of time. On top of the principal amount, you might discover that the lender charges outrageous fees and tacks on high interest rates.
- Secured loan.
If you have a lender in mind that you really want approval from, you might increase your chances by opting for a secured loan. With secured loans, you put up collateral that the lender can take if you default on your loan. For example, if you have a mortgage, this is a secured loan. Some banks will even allow you a secured loan with the contents of your savings account as the collateral.
- Unsecured loan.
Unsecured loans don’t require cosigners, collateral, or any other strings. However, this freedom often comes with higher interest rates, and can be difficult to be approved for. One exception there would be payday loans; they are unsecured loans that might give you easy approval. But they make up for that by charging you those aforementioned fees. Overall, unsecured loans are great for those with good credit and minimal assets who’d like to purchase a used car, pay for a wedding, or buy new equipment for a small business.
- Debt consolidation loan.
Why do you need a loan? If it’s because you want to pay off debt, there’s a specific type of personal loan for that. Debt consolidation loans roll all of your debts into one payment. This is great for streamlining and organizing, but can also reduce your interest rate on these debts. Before signing on, see if there are any fees associated with transferring the debt.
Heading off to college? Struggling with an emergency? Digging yourself out of debt? The situation influences the type of personal loan you’ll go after. Research different lenders today, and choose the one that’s most appropriate for your credit, your purposes, and your financial future.