If you are seeking a personal loan, you may not be aware that there is a variety of personal loans out on the market today. Each type of loan has its own pros and cons, all thought each type of loan has interest of course. All personal loans are installment loans, loans which have a set number of payments. Installment loans can be for terms as low as 1 month to as high as 30 years. Lets examine the various personal loan types and products on the market today, as well as common personal loan terms:
These personal loans will have the interest rated at fixed terms, meaning the interest will not lower or raise with the market. This can be for the entire term of the loan or for part of this term. This type of loan comes in handy if you expect that interest rates will rise. The interest rate offered will depend on your FICO score as well as a benchmark interest rate or index.
Variable-Rate or Adjustable Loans
These loans interest rates will fluctuate with the market. These loans are risky due to the fact that your interest rate could sky rocket, depending on the market. However you could also end up paying less interest in favorable market conditions. The maximum rate the lender can charge you is thankfully capped.
These are personal loans for those who have terrible credit and basically cannot get a loan elsewhere. This is the last resort loan. They feature extremely high interest that often results in the borrower needing to roll the loan over, resulting in more debt. Some borrowers of payday loans become trapped in an ever increasing number of loan rollovers. Interest rates on these loans can be as high as 400 percent or higher.
There is a wide variety of personal loans that can be applied for online only. These loans offer the ease and convenience of being able to apply right in the comfort of your own home. You can find some deals with interest rates online, as well as being able to find non-prime lenders. Non-prime lenders are those who lend to sub-prime borrowers, or those with poor credit. One example of online lenders would be the various peer to peer lending platforms today.
Peer to Peer Loans
These loans are made between an investor and you. Once upon a time these loans were always through private investors, but today the various peer to peer platforms are flooded with banks making the loans. Today you would be hard pressed to find an actual “peer” making the loan. They make use of a variety of credit checking tools, some do not rely on just credit reporting agencies to make their loan decisions.
These loans are backed or secured by some form of collateral. These loans tend to carry lower interest rates since the loans principle is backed up by your collateral. The risk is that if you default that you will lose your collateral. These loans are ideal if you are secure in your ability to repay the loan as agreed upon.
Unsecured or Signature Loans
These loans are not backed by collateral, rather they are backed solely by your signature and agreement to repay the debt. You need good credit to obtain these loans in most cases. These loans tend to have a higher interest rate due to the risk the lender is taking in lending to you without collateral.
Single Payment/Bridge/Interim Loans
These loans are paid back in one payment, with a lump sum of interest due on repayment. These loans are used for short term financing.