What Are The Different Types Of Personal Loans?
Exploring different types of personal loans can help you select the type that is best for you. So where can you learn about the different types of personal loans? Right here! We have organized reader-friendly information that you should know about personal loans. When you are ready to apply for a personal loan we encourage you to visit Acorn Finance. Acorn Finance is a trusted online platform that can generate multiple personalized loan offers within seconds.
What is a personal loan?
A personal loan allows you to borrow money and use it for just about anything you need it for. In most cases, personal loans are issued by credit unions, banks, or online lenders. Personal loans that are offered with fixed rates and fixed terms can be more common than variable-rate personal loans. Just like most loans, borrowers are expected to repay their loan in accordance with the repayment terms. Compared to credit cards, interest rates offered for personal loans are usually lower. While some credit cards may offer a 0% introductory rate, it’s usually only for a short period of time. Once the introductory period is over you can be charged interest for that time if the balance is not paid in full. Personal loans can offer you more money and terms between 1-7 years.
Are there different types of personal loans?
Yes, there are different types of personal loans. In the following section we will dive into the main types of personal loans. In addition to the main types below, personal loans can also be offered as co-sign loans, personal lines of credit, and more. Co-signed loans can be a good option for borrowers with credit challenges.
What are the main types of personal loans?
Below, we will compare the main types of personal loans. You may be wondering, which personal loan is best for me? The answer is dependent upon your situation, circumstances, and needs.
#1. Secured personal loans
Secured personal loans are backed by collateral. This means that if the borrower defaults, the lender can seize the collateral. Collateral can include your home, car, or other assets. Compared to unsecured personal loans, secured loans are less risky for the lender. Since secured loans are less risky for lenders they usually have lower interest rates than unsecured personal loans. However, borrowers have more at risk when using a secured loan which can make unsecured loans more appealing even if the interest is slightly higher.
#2. Unsecured personal loans
Unsecured personal loans do not require any collateral making them one of the most common personal loan types. Unsecured loans can be riskier for lenders making it justifiable for them to charge slightly higher interest rates. Most unsecured personal loans offer interest rates between 4.99% – 36% and repayment terms between 1-12 years (terms vary by the purpose of the loan.
#3. Fixed-interest personal loans
Most personal loans have fixed interest rates. This means that your interest rate is predetermined at the time the loan is taken and your monthly payments stay the same. Fixed interest rate loans are more consistent and budget-friendly since you will always know what your payment is. In addition, they can offer a sense of security for longer-term personal loans.
#4. Variable-interest personal loans
Personal loans with variable interest rates have interest rates that are based on benchmark rates set by banks or lenders. Compared to fixed interest rate loans, variable rate loans do not have consistent monthly payments. Your loan rate, payment, and total interest cost can change on a regular basis. Most variable-rate loans offer lower interest rates to attract borrowers. In addition, most variable rate loans provide a cap on the maximum interest rate that can be charged during the life of the loan. The cap is designed to protect borrowers. It’s unlikely that rates will surge in a short amount of time. Therefore, variable rate loans can make sense for shorter-term loans.
#5. Debt consolidation personal loans
Debt consolidation loans allow you to combine multiple debts into one single loan. This can simplify your debt by giving you just one monthly payment. By having all of your debts in one place it can be easier to monitor and pay off.
Pros & Cons of a personal loan:
- Competitive interest rates
- Versatile ways to spend
- Offered by a variety of lenders
- Available for all credit types
- Generous loan amounts
- Quick approval & funding
- Terms up to 7 years
- More debt
- Origination fees
- Early payoff penalty may apply
- Other alternatives may have lower rates
When to consider getting a personal loan
You may want to consider getting a personal loan if you want to finance a large expense project or consolidate debt. If you can afford the monthly payment for a personal loan then you should use the loan! You should make sure the interest rate and terms being offered are competitive as well. Acorn Finance is a reliable and secure platform that allows you to compare multiple personal loan offers without affecting your credit score. This can help expedite the shopping process while allowing you to secure the best offer.
In conclusion, there are different types of personal loans and selecting the right one is important. No matter what type of personal loan you need or want, Acorn Finance can help you find the best offer.
Three steps to get started with AcornFinance:
#1. Complete and submit a short loan application online
#2. Receive multiple pre-qualified offers
#3. Get connected with lenders to obtain your pre-qualified loan
Need a personal loan? Apply online today!
Any questions? Reach us any time at email@example.com.