InsightsFrenzy.com | Discover Insightful Content

Different types of personal loans

Personal loans are given out to people who want to avail an unsecured line of credit, since they have no collateral to put up and hence cannot avail regular loans. Most types of personal loans do not require collateral as security and the promise to repay money is the only assurance for the loan taken.

There are a number of things that you should take into account before applying for a personal loan among the multiple sources available to choose from.

A thorough research of the lender, the interest rates at which the personal loan is being offered at and terms of condition of the loan will help you get the best deal.

Listed below are the different types of personal loans:

Personal loans are generally divided into two categories namely unsecured and secured loans.

Unsecured loans: Unsecured loans, as the name suggest, do not require any collateral security for the loan taken. Banks and financial institutions will generally not deal with a lot of unsecured loans since the only guarantee that the loan will ever be repaid is on the basis of the promise made by the borrower. Unsecured loans and short terms credits are generally given by individuals, credit unions, and third-party credit sources. However, the interest rate will be higher and to some extent even exorbitant.

Fixed rate personal loans: Normally personal and unsecured loans will have varying rates of interest, since there is no specific guarantee that the loan amount will be repaid back in time. the risk factor for the lender is higher and this drives up the rate of interest. However, in case of fixed rate as the name suggest, the rate of interest will not vary for the duration of the loan taken. The lines of credit in this case will have variable rates.

Variable rate personal loans: A schedule or clause in the agreement or contract for the loan taken will allow the interest rates to fluctuate, with some that carry a cap limit as to how much the interest rate can fluctuate. It is very important to verify the rate of interest, fluctuation caps, and the terms of variable rate personal loans before taking up the loan.

Lines of credit: A line of credit is a different borrowing system which allows you to use the available line of credit, which will be different for every borrower. Line of credit options generally include secured and unsecured options.

Disclaimer:

The content provided on our blog site traverses numerous categories, offering readers valuable and practical information. Readers can use the editorial team’s research and data to gain more insights into their topics of interest. However, they are requested not to treat the articles as conclusive. The website team cannot be held responsible for differences in data or inaccuracies found across other platforms. Please also note that the site might also miss out on various schemes and offers available that the readers may find more beneficial than the ones we cover.

Popular Articles

Understanding the Types and Options Available for Personal Loans

Personal loans act as a vital financial safety net. Whether one has an unexpected healthcare bill, car repair needs, or wants to consolidate existing debt, it can offer temporary financial relief.

The different types of no cosigner student loans

If you’re a student looking to get back into education, then you might have to consider student loans. 70% of all students that enroll in college today, have to rely on a loan – private or federal – to pay off part of, or most of their tuition costs.

Terms and conditions for personal loans by American Express Personal Loans

There are some rules and terms that you need to know before you apply for a loan with American Express. Following are some of the terms and conditions that you should know:

Steps To Get The Best Business Loans

One of the biggest worries of young businesses is getting seed capital. Startup founders often go for the option of applying for a business loan along with searching for an investor.

Guide to Getting a Cash Loan to Meet Short-term Needs

The need to borrow money might arise for several reasons. You are planning a big purchase, like a house, and you need to finance this with a loan. You have incurred an unexpected emergency expense and need to borrow money for it.

How to apply for personal loans

There are numerous loan products available in the market. However, it is important to choose the type of loan which suits your needs and fits your ability of repayment. A personal loan is a loan that is taken by an individual from lenders, banks, or credit unions.