It is very difficult for anyone to anticipate an emergency. There comes a time in your life when you need cash… and fast! One way of getting out of such a situation is to get a personal loan meaning money that you borrow money for your own personal use.
There are many types of loans and finding the right one for you shouldn’t be too difficult. There are various types of loans that are accessible to both bad credit and credit-worthy borrowers alike. Below is a list of 8 different types of loans you can turn to when pushed to a corner and borrowing is the only way out.
1. Friends and Family Loans
This may appear to be one of the easiest types of personal loans to get but in reality, it’s the one where you have the most to lose. Money lending is a sensitive affair as old friends and tight-knit family members have fallen out because of money feuds. The beauty of such loans is that repayment plans may be the most flexible and you as the borrower get to enjoy extremely low-interest rates or even none at all.
It is important as the borrower to take a friend and family loan as seriously or professionally as you would a bank loan. Have the loan agreement spelled out on paper specifying the principal amount, the interest rate (if any) and the repayment terms.
Make sure to pay back as promised and if for whatever reason, you experience a snarl-up in repayment, keep the communication lines open with updates to your lender. This helps build trust and prevents burning bridges.
2. Payday Loans
A payday loan is one of the loan types that are relatively easy to get and is short term. It is the type of loan whose repayment is banked on the borrower’s paycheck. Such a loan comes in very handy and is applicable to people with a steady income who require small amounts of cash instantly.
Payday loans assist with impromptu medical bills, school fees and even to cover travel expenses for a family holiday. One can acquire such loans online or at a lending facility. Most payday loans involve filling out an online application form detailing the required personal and financial information required by the lender.
Payday loans are instant loans because once you have been approved as legitimate and qualified, the amount is directly credited into your account and is paid back upon your subsequent pay.
3. Secured Loan
A secured loan is a loan that is fully backed by an asset which acts as collateral. Collateral comes in different forms such as cars, homes, jewelry, etc. The asset is normally worth more than the loan amount so that in the event that the borrower defaults, the lender can sell the asset that was put down as collateral.
It’s risky to put down important assets but if you’re sure that you can pay back, then this loan is advantageous. Most times, the interest rates are lower than unsecured loans because the lender is more confident that the borrower will pay back and not risk losing the asset.
4. Unsecured Types of Loans
An unsecured loan, unlike its secured counterpart, does not have an asset for collateral. The only guarantee that the lender has is the borrower’s word, therefore, the interest rates are high due to the lack of collateral. Whereas someone with a bad credit history can obtain a secured loan, an unsecured loan is only approved to lenders with a good credit score.
Different unsecured loan types can be accessed online or offline at various financial institutions. If you have a steady income and the repayment terms are comfortable with you, then an unsecured loan will do. Some lenders are open to lending to borrowers with a below than average credit rating but the repayment terms will be less favorable.
5. Variable-Rate Loans
A variable rate loan is one where the interest rate that is charged on the overall outstanding balance changes with variations in market interest. This means that the borrower’s payments vary over time. The interest rates on these types of loans are linked to a standard set by banks.
It makes sense to take on a variable-rate loan over a short term repayment plan. This is because it is highly unlikely to have rates surge over a short period of time.
6. Fixed-Rate Loans
Loans of this type entail the monthly repayments/ installments of the loan staying the same throughout the duration of repayment. Fixed-rate loans are great for budgeting because of their consistency enabling the borrower to plan ahead. If you want to get a long-term loan, it is safer to get a fixed- rate loan instead of a variable-rate loan.
7. Co-Sign Loans
A borrower may not have a good credit rating but has a guarantor who does. This guarantor becomes the co-signer for the borrower. By co-signing, the guarantor agrees to pay the lender’s debt in the event that they are not able to pay back.
Having a co-signer who has a good credit rating is beneficial to the borrower because they will receive more favorable interest rates and repayment terms on the loan.
8. Bad Credit Loans
Banks do not lend to individuals with bad credit scores. However, there is hope for borrowers who aren’t credit-worthy. One is able to obtain a loan with a bad loan credit from private lenders (both online and offline) and institutions specialized in giving bad credit loans.
Are You in Need of a Loan?
At the end of the day, loans can get you out of sticky situations and as long as you pay them back on time, they can help build or improve your credit rating. Once you’ve understood the different types of loans and are ready to apply for a loan, it’s important to find a reputable lender with competitive interest rates who can give you money in the shortest possible time.
Visit our page today for more tips and information on how you can get your money right.