What Are Personal Loans And Which Types Exist In The Market?
Over the past few years, our societies have changed to much extent. People have changed, their lifestyles have changed and so their needs. With respect to today’s needs of the people, who cannot survive without a shelter, food and cloth, the trend of giving and taking personal loans has emerged. The trend is increasing day by day as every needy out there even the one who was never granted any loan option because of finite or unacceptable credit history requires a personal loan. Generally the purpose of personal loan is to spend money in financial sectors like residency, education, a long vacation, marriage nuptials or luxury items such as home appliances. Personal loan in reality is better than the credit cards. The interest rate on a personal loan is lower as compared to credit card loans.
Personal loan also known as consumer loan is permitted to the borrower for the purpose of his/her private use i.e. family’s vacation/education, medical expenditure, household’s mending and repair and purchasing an automobile. A personal loan is never granted for a commercial/business use. Consumer loan is either secured or unsecured. The refunding is usually agreed on a fixed tenure for repaying fixed amount over a time period.
• Secured Personal Loan is protected by the valuable possession (collateral) of the borrower or by adding one person’s name to the agreement. The creditor has the authority of taking over the asset in case the borrower fails to repay.
• Unsecured Personal loan does not require any security from the borrower as it is agreed on the basis of borrower’s fine credit history and capacity of paying back on time. The interest rate is higher than secured personal loan as no collateral is present.
Which types of personal loans exist in the market?
Since the time personal loans evolved, borrowers have faced numerous problems in meeting the repayment terms and conditions. This has provoked today’s lenders to alter the patterned granting practices. Now the lenders offer a wide range of options for the borrowers so that they can repay the loans easily. There are several types of personal loans that exist in the market. Each type of personal loan has its own negative and positive terms.
HOME EQUITY PERSONAL LOAN
A home equity personal loan is a secured personal loan in which a limited amount of loan is given to the borrower. The collateral used is a home (house/apartment). The interest rate is low if home security is assured. The repayment agreement lingers for a long tenure with short payments per month.
HOME EQUITY LINE OF CREDIT
HELOC is also a secured personal loan which requires the security of home from the borrower. The borrower has to pay interest on loan. The repayment is agreed on a monthly basis.
SHORT-TERM PERSONAL LOAN
A short term personal loan is a type of personal loan which is given when there is an urgent need of cash. This type of loan is unchallenging and speedy to obtain. The set tenure for repayment is short; therefore the interest rate is higher than usual.
FAST CASH-ADVANCE/PAYDAY LOAN
Payday/Fast cash-advance is similar to short-term personal loan. It is generally given in when there is a crisis or emergency circumstances. Just like short-term personal loan it is trouble-free to obtain. The immediate funding is risky, as the interest rate reaches up the sky. The repayment period is too short, i.e. around two weeks.
MILITARY PAYDAY LOAN
Military payday loan is exclusive to the military men and women for their convenience. The submission of military associate proof is mandatory. It is an unsecured personal loan where the credit history is not really considered while dealing. The interest rate varies and the repayment tenure is also adjustable.
BAD CREDIT PERSONAL LOAN
This type of bad credit personal loan is unsecured and is exclusively for those consumers who are found with an unfair credit history. The interest rate is overpriced.
SECOND-CHANCE PERSONAL LOAN
The second chance personal loan is granted in the case of private tragedy or severe financial upheaval. Both options, whether secured or unsecured are open depending on the situation of the borrower. However, the interest rate remains unreasonable when there is restricted amount of money.
Consequently, personal loans can be easily obtained from credit unions and banks. Both the organizations have their own advantages as well as disadvantages. Since the bank is a for-profit organization, therefore it finds its own benefits. The Credit Union is a not-for-profit organization; therefore it looks for satisfying its customers. It is the borrower’s choice to choose the best organization and the best type of personal loan according to the need of the hour. A personal loan is an amazing source of finance with the reasonable features related to every type.
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