Different Types Of Personal Loans

 

What Is a Personal Loan?

A personal loan is a type of loan that gives you a fixed amount of money in one lump sum. This type of loan can range anywhere from $1,000 to $50,000. The most common kind of personal loan is unsecured, but you can also get secured personal loans.

The money from personal loans can be put towards almost anything. That being said, you might find that some lenders do have restrictions on where the money can be spent.

If you’ve ever applied for a credit card, you’ll find the process of applying for a personal loan quite similar. When you are approved for a personal loan, you’ll receive the funds all at once. Repayment of the loan begins right away.

Unsecured Personal Loans

An unsecured personal loan is a loan that isn’t backed by any kind of collateral. This means that this is a riskier type of personal loan for the lender. You can therefore expect that the annual percentage rate (APR) you are charged will be higher than with a secured personal loan.

Your credit score is the primary way that the APR you receive and whether or not you are approved is determined. The rates can vary widely, from 5% to 36%. The terms of repayment can range between one year and seven years.

Secured Personal Loans

Secured loans are backed by collateral. This means that the lender can seize the collateral if you end up defaulting on the loan.

Auto loans and mortgages are examples of secured loans.

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