No one is absolutely certain when they are going to be pressed with the need for quick cash, and when this kind of situation knocks, a personal loan can be your best way out. Not all personal loans are equal though, they differ in terms of the terms of approval, application process and documentation required. To help you understand the options available for you in the event of financial need, here’s a rundown of four different types of personal loans you could choose from.
Traditionally, people take personal loans from banks of other financial institutions. However, there is a recent development, peer-to-peer lending, which represents a break from this norm. Peer-to-peer lending involves taking loans from fellow people rather than of conventional lenders or financial institutions.
These individual lenders have become much popular in the world of personal lending because they tend to be more flexible in terms of their approval terms especially with regards to credit requirements.
They tend to be inclined to take on a little more risk than traditional lenders. So, they may be a favorable alternative for borrowers who would have difficulty qualifying for a traditional loan.
These are short term loans that typically allow borrowers to take small amounts of cash repayable by their next payday. Payday loans, sometimes referred to as cash advance are characterized by repayment terms of less than one month, sometimes about 14 days.
These loans, offered by lenders like moneyboat.co.uk/, are typically a convenient option for salaried persons in need of quick cash – largely because they are quick to process. This type of loan is however characterized by high interest rates and therefore may not be the best as a regular source of borrowed income.
Secured loans are those that are tied to some form of collateral. The lender typically asks for an asset such as your car or house as security against losses in the off chance of a default. Secured loans tend to be larger sums of money compared to most other types of personal loans. In case you fall back on repayment in accordance with the loan terms, the lender will often repossess the item you have provided as collateral. Auto loans and mortgage are some of the common examples of secured loans.
These are the exact opposite of secured loans. As the name suggests, unsecured require no collateral and tend to be smaller amounts of money.
Due to the lack of security, lenders typically take your credit rating into account when determining the amount that you can borrow as loan. The interest rates however tend to differ from one provider to the other – so you may want to shop around before deciding on one.
As you can see, there quite a few different types of personal loans out there. The different combinations of repayment terms, costs and loan structure will play out to determine whether your personal loan is a financially smart choice or a harmful one; so choose wisely.