For most of us, there comes a time when we need a loan for cash assistance with anything from a large purchase to paying off a high interest debt. However, there are a number of different options available for those who need to attain a loan.
So before you simply settle on the first loan you qualify for you want to learn a little bit more about them and identify the right one for your needs.
There are two different major categories that loans fall into: secured and unsecured.
Secured loans can be attained based on collateral of your belongings, such as a car or home. This type of loan is more common for those with average credit scores because the lender can repossess the secured item in order to receive repayment.
Unsecured loans are rather difficult to attain, especially for those with poor credit, because there is nothing to secure it, like a home or vehicle. All that is needed is a signature, so they certainly have higher interest rates. Most lenders want to see that you have a solid credit history and have minimal debt to issue these types of loans.
Discussed below you will see some of the common samples of these types of loans.
Payday or cash advance loans – Ideal for unexpected expenses or emergencies, cash advance loans (also called payday loans) are rather simple to qualify for if you want minimal amounts of money, typically less than $1,000. These loans have short repayment terms, usually two weeks, and come with high interest rates.
Cash advance loans are perfect for those who have a quick emergency to take care of and want to repay their loan quickly.
Home equity personal loan – For those homeowners who have sufficient equity, you might be able to qualify for a home equity loan with a lower interest rate that is secured by the value of your home.
This loan is useful for larger amounts of money and for those who want to have a longer term to repay the amount borrowed. Home equity loans are ideal for those who want to make a large purchase or need repairs done to their home.
Short term personal loan – Similar to payday loans, short term personal loans hold a possession as collateral for a smaller loan with a short term. The title to a car is commonly used as collateral in these cases.
This would be appropriate for someone who has an emergency expense to take care of, similar to a payday loan. Though these are not the only examples of secured and unsecured loans, these are quite common personal loans.
While there are a number of different personal loans you may want to consider, keep in mind that you are going to want to avoid getting into debt as much as possible.
Consider the repayment terms, interest and penalties involved if you are not able to repay this loan in a timely manner. This may help to weigh your decision as to what type of loan to choose.