In times of financial difficulty, personal loans can be incredibly helpful. While some types of personal loans are associated specifically with one purpose — such as student loans, car loans, and mortgages — others can be used for just about anything. You can take out a personal loan to help pay your medical bills, to do repairs on your car, or to help mitigate the costs of moving. This is one of the greatest benefits of a personal loan. Personal loans can be used for just about anything, no questions asked. So, if you’re looking for funding for things that aren’t associated with a specific loan type, then a personal loan may be for you. There are a few different types of personal loans, one of which should fit your specific needs.
Unsecured vs. secured loans
Many personal loans are unsecured, meaning that you don’t need to put up any collateral in order to obtain the loan. Instead, lenders rely on measures such as credit checks to ensure that you will pay back the loan as agreed. This does mean that you usually need to have an at least decent credit score in order to get a personal. If you don’t have good credit, lending companies are likely to believe that you’ll default on your loan, which is a large business risk for them. In addition, unsecured personal loans may have hefty interest rates, which can add up if you don’t pay the loan back quickly. However, if you have decent credit and just need a loan for a short period of time, then unsecured loans may work well for you.
Personal loans may also be secured. Secured loans have a physical collateral in order to guarantee that the lending company obtains something in the case of a loan default. These loans usually take the form of mortgages or car loans. In the case of a mortgage, for instance, your home is put up as collateral against the loan. So, if you miss too many of your mortgage payments, the lender can seize your home. Secured loans vary widely in regard to interest rates, although in general, longer-term loans such as mortgages have lower interest rates.
In the internet age, peer-to-peer lending is increasingly common. There are websites that connect potential lenders with potential borrowers, and the lender can then decide whether or not to give a loan to a particular individual. There are a wide variety of peer loans, although typically the interest rate is lower than more traditional loans. On-line loans of all varieties are more common nowadays than they used to be, as can be seen with the increasing popularity of peer loans. Peer loans are a good option if you can show that you are a reliable borrower and if you don’t want to deal with the hassle of applying for a bank loan.
In addition to these loan types, there are also some other options. Of course, you could always borrow from family or friends if you need cash quick, although doing so can get you into uncomfortable territory. Borrowing from loved ones should be considered a last resort, in order to protect your relationships.
You can also consider a non-loan option, such as opening a line of credit or a credit card, to help make ends meet during any financially difficult time.