The world of money lending and borrowing can be overwhelming at first, but personal loans are a common and well-established financial option available to most people. There are several reasons you may need a personal loan, and those different reasons can help you determine which kind of personal loan you need.
As you examine the reasons to get a personal loan, take a look at a few different loan options. Once you have decided which personal loan best meets your needs, you will have a better idea of where to start.
What Can Personal Loans Be Used For?
Personal loans are helpful because they have several uses, and generally these loans do not come with a lot of stipulations. Whether you need a cash advance on a paycheck, money to pay the hospital or student loan bills, or need a little extra money for an upcoming holiday or vacation—there is a personal loan to cover it. Personal loan lenders don’t generally stipulate how the money is used, so as long as you are using the money legally.
Depending on your needs, the loan can be large or small. A lender can help you determine the amount that is best for your individual situation.
What is an Unsecured Personal Loan?
The vast majority of personal loans are unsecured. This means that the loan is not backed by collateral like a house or a car. Most of the time, unsecured loan rates are based on your credit score, but some personal loan lenders do not require this. Unsecured loans generally have a higher interest rate than secured loans, because the lender is taking a bigger risk.
Unsecured loans are highly beneficial for individuals who need quick cash. When you get an unsecured personal loan through an online or specialty lender, the approval time is generally quick. Some specialty lenders even have programs without a credit check, making it easier for those with low credit scores to get the personal loans they need. Unsecured loans often have shorter, more accelerated loan periods, which is helpful for individuals who don’t want to be paying back the loan over multiple years.
Are there Secured Personal Loans?
Yes—some personal loan lenders offer personal loans that are secured. These lenders are very few and far between. Secured personal loans are backed by some physical form of collateral. By using collateral as part of the loan, a secured personal loan generally has a lower interest rate. These types of personal loans are not great for those without much collateral to offer and not all lenders offer secured personal loans.
On the occasion that secured loans are offered, it is usually because an individual does not qualify for an unsecured loan. In this situation though, it is generally best to work with a lender that will qualify you for an unsecured loan without a credit score.
Other Types of Loans
Perhaps you are considering using a personal loan to pay for school tuition, car payments, or small business expenses. Though these expenses could technically be paid for by a personal loan, there may be another loan more suited to these expenses. Student loans, car loans, and small business loans are all specifically tailored to the needs that they cover. Though it may seem like a personal loan could be used to cover any expense you need a loan for, it does not mean that you should do that.
Overall, personal loans are a wonderful way to bring financial security into your life. Whether it’s a home improvement project, or auto accident bills, covering your expenses means that you live with greater peace of mind. If you have other questions about personal loans, contact a local lender today. Lenders can help you make the best decision based on your credit score, income, and personal circumstances.