Did you know that 78% of Americans live paycheck to paycheck?
Are you one of them? If so, this means that not only is money tight, but that you probably don’t have much savings at all (or any!).
While living paycheck to paycheck works most of the time, you may hit a situation where you need extra cash. For that, you can consider applying for a personal loan to tide you over.
In this article, we’ll discuss four types of personal loans you should know about.
1. Secured Loans
A secured loan is where you give up some collateral to borrow money. You’ll then pay back the amount slowly, month by month.
If you’re unable to pay the amount back, then the lender can seize your collateral as payment instead.
This type of personal loan has a relatively lower interest rate because there’s less risk for the lender.
In general, the better your credit score, the lower your interest rate will be. A benefit of secured loans is that it’s easier to get if you have a poor credit score.
You can usually borrow anywhere between $1,000 to $50,000. In some cases, you can even borrow up to $100,000. You’d typically take 1 to 5 years to pay this amount off.
2. Unsecured Loans
Unsecured loans are the opposite of secured loans, which means you don’t put down any collateral. Because of this, you generally need to have a decent credit score for approval.
Unsecured loans typically have higher interest rates than secured ones do because the lender has to take on more risk.
The amount you can borrow and the repayment period is the same as with secured loans.
3. Cosigned Loans
Cosigned loans are actually a type of unsecured loan. However, you usually need to have good credit to secure one.
If you really want an unsecured loan but you have a poor credit score, a cosigned loan is a good alternative. Someone with good credit can help sign for the loan.
Do note that this loan will go on their credit report, even though you’re using the money. This means that there needs to be a high level of trust with the cosigner.
4. Debt Consolidation Loans
If you’re already in lots of debt with multiple lines of credit, debt consolidation loans can help you get back on track.
This type of personal loan allows you to combine all your debt into 1 loan. This means you only have 1 monthly payment. In addition, you’d generally enjoy a lower interest rate too.
If you want more information about personal loans, read more at Bonsaifinance.com.
Know the Types of Personal Loans Available to You
By knowing the types of personal loans available, you’ll be able to make better financial decisions.
Not every type of loan is right for everyone, so you’ll have to do more research to figure out which one’s right for your needs and situation. But with this article, you already have a great starting point.
If you enjoyed reading about personal loan types, then make sure you check out the rest of our blog!