Everything You Need To Know About Personal Loans: Types, Usability, Pros & Cons
If you do not have enough cash in your pocket and you need to buy something, that’s where personal loans come in. Even if you ‘want’ to buy something and do not have enough money to finance it, personal loans can finance it in a low-cost way. Thus, taking personal loans can be a smart and low-cost way to befit your need or want when you do not have available cash to finance it.
However, the foremost usability of personal loans is that these loans can be taken in real time. With this loan, you can buy whatever you want or need and pay it back when you have enough money handy.
But the question is, is it so simple to get personal loans? Most importantly, is the process of taking personal loans is so straightforward as it seems? Turns out that it is not as simple as it appears to be.
Here is a detailed look at the types and pros and cons of personal loans:
Common Types of Personal Loans
Here are some common types of personal loans:
Secured Personal Loan
The commonest type of personal loan is a Secured Loan. This type of personal loan is backed by tangible assets and is of low risk. An important feature of secured personal loans is that there are relatively lower interest rates on these loans.
Because the loan is backed by an asset, borrowers tend to ask for low-interest rates in secured personal loans. And more often than not, it works out well. Overall, secured personal loans are considered to be the best personal loans.
Unsecured Personal Loan
Another common type of personal loan is an unsecured personal loan. Unlike secured personal loans, these loans are backed by the credit score of the buyer. In other words, unsecured personal loans are determined by the credit score. Once it drops, the interest rate goes up.
Likewise, once the credit score of the borrower goes up (say 710+) the interest rate goes down. Financial experts suggest that unsecured personal loans are riskier than other types of personal loans.
Karolina / Pexels / Depending on which type of personal loan you opt for, the perks and terms & conditions vary.
Other Less Common Types of Personal Loans
Apart from secured and unsecured personal loans, here are some ‘less common’ types of personal loans:
Credit Builder Loan
A Credit Builder Loan can be taken either by a cash down payment or a saving account. If you do not have a credit score – or your credit score is below average – a credit builder personal loan can work best for you.
Another less common type of personal loan is Cosigner Personal Loan. in this type of personal loan, the borrower uses someone’s credit card who has a strong credit score.
This guy could be someone from the family or an acquaintance. Byt the important thing is that he or she agrees to ‘voluntarily’ use his credit card for the borrower.
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