Types of Personal Loans

A bank loan is usually when a financial institution lends to consumers for a specific period of time. As part of the bank loan, the consumer is required to pay back a specified amount of interest per annum, or month, over a specified period of time. Unsecured Bank Loan. This is a loan that makes use of an asset as collateral against which you are able to borrow a large amount. But in case of default, your asset could be taken possession of by the lender. The advantage with unsecured loans is that the rate of interest is higher than secured loans.

Home Equity Loans. Home equity loans can be used to pay off debts such as credit cards and car loans. The loan is secured against the borrower’s house, which he is using as collateral, but the interest rate is lower than that on other bank loans. Although you can obtain a larger amount under home equity loans, you need to repay the entire amount in about 10 years, but the lower rate of interest makes it more manageable.

Personal Loans. Most credit unions offer personal loans at fairly reasonable rates, and at times have special financing options for those with bad credit. Personal loans can be unsecured or secured. Unsecured personal loans are generally for larger amounts such as buying a car or house.

Bad Credit. There are banks that specialize in bad credit loans. Some lenders are willing to offer personal loans even for people who have filed for bankruptcy. Even if you have been turned down elsewhere, you may qualify for unsecured personal loans from these lenders. Lenders who specialize in these loans often offer better terms to borrowers, since they do not have to put up collateral. But, you must be aware that these types of loans will generally carry higher interest rates, and may take longer to qualify for.

Small Business Financing. If you own your own business, or are interested in starting a business, you may qualify for small business financing through traditional banks. In most cases, you will also find small business financing from credit unions, as well as the Internet. In either case, you may be able to secure the financing you need for your start-up costs, or to expand your existing business.

Unsecured personal loans are available from a number of online lenders, and many banks typically offer a variety of loan products. You should make sure that you fully understand the terms of any loan offer you are considering. While there are advantages and disadvantages to each option, you should research both options so that you have the information necessary to make an informed decision. You should also inquire with your local bank regarding their loan options if they do not offer this type of financing.

Share This