For those looking for a borrowing option to help pay for bills or unforeseen expenses, a personal loan is the financial route most borrowers opt for. Split between secured loans and unsecured loans (depending on whether assets are used to secure the loan), personal loans are ideal for individuals who want to borrow a set amount of money, steadily paying back a specific sum from their bank accounts each month based on a lender’s personal loan rate, with a fixed number of payments.
Unsecured Personal Loans
Personal loans are available from loan providers on a secured or unsecured basis. Most customers generally opt for an unsecured personal loan so they are not required to provide security against the amount they are borrowing, for instance a property. Such a loan is usually taken out as a small personal loan and essentially means borrowers will be in little danger of losing their home if they cannot keep up repayments as other assets will be prioritised if debt collection becomes necessary. However because unsecured personal loans do not provide any security to the lender personal loan rates are often very high, as are loan charges.
Secured Personal Loans
Secured personal loans, on the other hand, ensure that the money borrowed is secured against an asset. A secured personal loan is a wise option for those who want to borrow larger amounts to make a big purchase or to consolidate any existing debt. A bank will lend an amount that is partly determined by the value of the asset a customer is borrowing against – most often property – which a person risks losing if they cannot repay their loan.
Compare Personal Loans
Whichever type of personal loan is more appropriate for a person’s financial needs, applicants should compare personal loans on the market to find the best interest rates offered. Low rate personal loans are typically found with secured loans but some competitive low interest personal loans can be found with unsecured loans too, depending on how the interest is calculated.
Personal Loans Online
Customers can nowadays apply for personal loans online. Certain online lenders advertise instant personal loans which promise that their customers will receive money almost instantly if they fill out a personal loan online form which is subsequently approved. Surprisingly, an instant approval loan is regularly aimed at those with bad credit. ‘Bad credit’ personal loans can be of great benefit to those with a history of poor credit to help them rebuilt their credit rating. Customers should nevertheless be wary of bad credit loans with extortionate interest rates, as it is easy to miss relevant information when taking out online loans. Aside from this, peer to peer loans are available exclusively online.
Short Term Personal Loans
Applicants can either take out a long term personal loan or, more commonly, a short term personal loan. Short term personal loans often work as payday loans which are most suited to those who might run out of money before their next pay cheque arrives. Borrowers are lent comparatively small amounts, and these small personal loans usually run for no more than one month. However, borrowers should beware the very high interest rates associated with these loans; even with small same day loans it is easy to get into trouble with repayments, in which case they may need help with debt management.
Long Term Personal Loans
Providers of long term personal loans, however, usually require each borrower to secure these loans against their property, but banks, building societies and online lenders can allow them to run for up to 25 years.
Personal Loan Calculator
As taking out a personal loan can be a complicated process, applicants are advised to use a personal loan calculator to see how much they can afford to borrow. Personal loan calculators advise people on the lowest repayments they could be making and will help them when it comes to going out and finding cheap personal loans most suitable for them.