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Different Types of Personal Loans- Which Suits You the Most?

Different Types of Personal Loans

Personal Loans

Different Types of Personal Loans- Which Suits You the Most?

Different Types of Personal Loans- Which Suits You the Most?

The personal loan is a very common need of common household struggling to meet out even the ever-rising living expenses and mounting dues. Unstable economy and political conditions are prevailing for over the years causing several kinds of problems for the common man – business class or service class. Although all the leading banks including Standard Chartered, HSBC Holdings, Lloyds Banking Group and Royal Bank of Scotland etc offer the variety of credits to help the individuals but the rigid criteria for eligibility keeps the willing borrowers, especially having a low credit score, away. The low profile borrowers know the high probability of application rejection at mainstream regular banks; therefore, they approach the direct lenders advertising for the variety of bad credit no guarantor personal loan.

Types of Personal Loan- Choose the Best:-

The personal loan is a fixed interest rate credit usually for one to five years. With the growing demand, the variety is also expanding because direct lenders are trying to offer the tailor-made solution for the individual’s financial need.

Related: All That You Need To Know About Personal Loans in the UK

Before approaching the lending source, you must know the loan types to choose the best saver.

Unsecured personal loans: The most of personal loans are unsecured; therefore, these are offered at higher interest rate than to home loan or car loan. Also called instalment loans, the repayment is highly predictable, affordable and manageable because the borrower knows well when and how much he has to pay.

Secured personal loans: This type of credit is secured against the collateral like home, shares or car. Comparatively, these are cheaper and are available for long-term also. Almost all the credit unions offer this credit facility taking your saving account as an asset. This credit facility keeps the mortgaged asset at risk in case of failure. It is good only if you need a big amount for long-term.

Fixed-rate loans: This credit facility comes to you at a fixed interest rate; therefore, instalment amount for each month is same. It is good for long-term debt, where the possibility of an increase in interest rate exists but you pay less at the interest rate fixed at the time of the deal.

Variable-interest loans: This credit is provided with the variable interest rate. If you take a loan for long-term, there exists a possibility of an interest rate hike. Most of the line of credits are offered at variable interest rate term. As per current conditions, there exists no possibility of a reduction in interest rate.

Debt consolidation loans: This unsecured credit facility is made available to the borrowers having multiple loans from different sources and at different terms and conditions. Managing multiple loans is a difficult task as well it costs more because of the different interest rates of different loans. Debt consolidation loan merges all the pending loans into the one; thus, the borrower feels easy to pay with cost benefit.

Payday loan: It is a low amount unsecured loan facility for the employed people. The amount is credited only for 28 days or up to the next salary day. The entire amount is to be paid in single instalment; however, some direct lenders offer a payday loan with an extended repayment period also. The higher interest rate poses the biggest challenge for the borrowers; otherwise, it is the most dependable financial help.

How to Choose the Best Loan Type:-

Your sense of ‘need for the loan’ is the very first and important criteria for choosing the loan type. Getting the debt, tailored for your particular need, is useful. Be judicious about – how much, when what and how”. Here, how much means judge the minimum loan requirement with justification; ‘when’ means the right time to borrow; ‘what’ means how much it will cost because of offered interest rate; and, ‘how’ means the way to get the best-negotiated deal from the genuine government registered direct lender. If you need a small amount loan for short-term, go for fixed interest rate loan like a payday loan. If you need small amount personal loan but for a few months, go unsecured instalment loan. If you need big amount loan, prefer a mortgaged secure loan. In case you want some amount for purchasing a big item, using a credit card may be a good option instead of borrowing from a private lender.

Conclusion: The wide range of personal loans helps the households to choose the best suitable loan type that is up to the needs and within affordable limits. Never assess your affordability on unrealistic grounds; consider all the probable odd factors. Never let yourself fail in paying the instalment on the time; if it happens, contact the lender to find out a feasible solution.

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Katherine Sykes is the BlogOnFinance lead author, specializing in Finance and lead gen. As a lover of summary, she's going to stop writing before she reaches her words count maximum.

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