The Different Types Of Personal Loans

There are several significant purposes or situations that require certain personal financial assistances, where the amount of loan money required depends entirely on your needs or demands. While the purposes might be any one of the following typical ones like the wedding, buying a home, starting a business, buying a car, clearing your other debts etc., the need entirely depends upon your level of expectation from these purposes, say, you may want to buy a simple sedan or a supreme SUV, where it all depends on how big, powerful, and luxurious you desire your car to be.

Whatever might be the reasons or whatever might be your demands, just one vital thing that you should always remember about buying loans or financial assistance is you must repay them on time that too with some definite extra amount called the ‘interest’ or else you might end up facing unwanted situations ranging from fines to severe legal proceedings, which might screw up your life and ruin your reputation forever. Now you can find a way to Help me please. I have no honeymoon. No money. - Weddingbee

Now that you have understood the required responsible action from you with respect to loans, it is high-time that we discuss the different types of personal loans that are available in the current financial market so that you could understand the rules and regulations and make the desired plunge after calculating the pros and cons.

Types of personal loans
Sadly, nobody has conjured up ways to grow money as and when needed, but thankfully, there are many legal financial institutions that would offer us financial help in the form of loans, if our loan needs are sensible and at the same time we oblige to all their necessary rules and conditions. These institutions follow different procedures to offer you with the loan amount, based on what type of loan service or loan type they provide.

The following are the most prevalent personal loan types available in the market and understanding them thoroughly could benefit you in several ways when you are positioned in the real emergency scenario to avail some solid financial aid.

  • Secured Loans

This type of loan requires you to pledge any of your assets in exchange for the loan amount so that, in the event of any misconduct or failure to keep up your promise of loan repayment, the loaner has the right to seize your property in compensation for whatever amount he has loaned you. Generally, the collateral that is tied up to the loan is, more or less equal to the amount of money you are availing as a loan to ensure a fair compensation during unfavorable situations.
The title loan and home equity loans are perfect examples of secured loan types.

  • Unsecured loans

The best thing about this loan type is no collateral is attached to it, but the sad thing is, you end up paying the higher interest rate as the loaner has decided to offer you the required loan money, only based on your credit history and your mere valid signature. None other than the credit cards are the apt examples for this loan type.

  • Fixed-rate loans

By now we all know that if we avail loan then we are entitled to repay the amount with some interest amount. These interest rates or amount, remain the same for the fixed-rate loan types throughout the loan period, irrespective of the financial market’s current situation. This means you can be prepared financially to meet your monthly demands adjusting to your due interest payment. There are many home loans that belong to this fixed-rate type, where the interest rate never fluctuates.

  • Variable-rate loans

Just the opposite of the fixed-rate loan type, where, in variable-rate loan type, your interest rate varies depending on the current financial situation of the market and hence you may end up paying different amounts at different periods throughout your entire loan period. Even though this might leave you at times with tight monthly budgets, not to forget the better months, where you end up paying the lower interest rate than the standard rate available for the fixed-rate loan type.

  • Installment loans

In this loan type, you repay the loaned amount with interest in specific definite periods, say monthly or biweekly, or once in 2 months, however, the financial institution wants you to repay. As the principal amount loaned reduces with each payment, you enjoy lower interest rate moving forward.

  • Single-payment loan

Here, in this loan type, you repay your entire principal amount, along with interest, on or before the specific deadline and financial establishments that offer such loan type are often rare to find for the obvious reason of risk involved when compared to the installment loan types.

  • Payday loans

Also, known as cash advances, these loan types demand exorbitant interest rates and requires repayment within the shorter duration, say within a fortnight or less than a month and are often suitable for emergency situations. Even though the interest rates are indisputably higher, the process involved is quicker and especially when you could find some efficient lending companies like the ‘Lucky Loans’, where they offer to ward off your financial worries with their easy and time-saving online processes, during your emergency situations, it could be a life-saving option. If you are the lucky ones residing in the UK, then it is best to visit their website to understand more about their service.

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