When people face financial challenges, they go for loans to get out of situations. Loan helps people to solve their financial problems. Some people use this money to buy things and some people use it for emergencies like urgent medical checkups and urgent fee payments. Loan money can also be used for urgent house repairs or car repairs and for many other purposes. There are different kinds of personal loan to help with different purposes.
Types of Personal Loans
Unsecured loan means that borrower does not need to give any kind of security such as house papers, checks or other such things. Mostly people go for this type of loan when they require small amount but very urgently. It is also known as payday loans because this loan based on the monthly payment of a person. This loan has high interest rates because of the risk a lender take with his money by giving it to borrower without any guarantee. The lender does not have anything to get the money in case the borrower does not return the loan money.
Short term loans
This is a type of loan which borrower takes for a very small time period such as one month to six months. This loan also have high interest rates just like unsecured loan. In fact, people can take unsecured loan for short time period as well. Some lenders are giving secured loan for short time period as well against vehicle or check.
Secure personal loan require guarantee such as property papers or vehicle documents. This loan has less interest rate but incase the borrower does not return the money; lender can get his money back by selling the property or vehicle. Borrower will not have any right to stop the lender from getting his money.
Fixed rate personal loans
Other loan’s interest rates can increase or decrease with time but the interest rate of fixed rate personal loans will remain same for the installment time of the loan. Lender has no right to change the interest rates.
The amount of this loan can be returned in installments. Installment period can be decided between borrower and lenders. The interest rate will be paid with each installment. Secure and unsecured both type of loan can be paid back in installments. Some companies like Loan2Payday are giving the option of installment for payday loan too. They have done it to make things easier for people. Each installment will have same interest rate that will be decided between the lender and the borrower before signing
It is very important to think carefully before choosing a lender to get loan. Some companies will have high interest rates than other companies so you will have to research for the company which has least interest rate. It is also important to add not all the conditions to add in agreement papers so that there will be any chance of any kind of cheating. Do not apply for more loan amount than you actually need.