Personal loans are a great way to deal with sudden and unplanned expenses. Contrary to the traditional loans, personal loans provide a great degree of freedom and can be altered as per the customer needs.
Be it a sudden renovation, a new arrival in your family, business investment, an emergency or any pending payment. Personal loans are a great way to tackle any sudden expense without any hassle.
This write-up is a complete know-how about various types of personal loans that are available in the market. All of them are different and have their pros and cons. But to get a loan, one needs to check and boost their eligibility to apply for a loan.
An unsecured loan is the one in which money is lent to the borrower just based on his/her creditworthiness. This type of loans does not require any collateral. For people who do not know much about collateral, it is a guarantee that the borrower deposits to the lender. It acts as a safeguard to the money lent in case of the borrower is unable to pay back the money as per the terms.
Though unsecured loans do not have any collateral, they do carry a hefty amount of interest associated with them. In order to get an unsecured loan, the borrower needs to have a good credit rating.
A secured loan is the one in which the borrower secures the loan amount with a collateral. Any asset like property or jewelry or even a car can be used as a collateral. It is a more secure form of a loan from the perspective of the lender.
Secured loans have lesser interest amount associated with them. This is due to the collateral involved in the loan agreement. In case of non-repayment of the loan, the lender can seize the collateral and regain the loan amount. The borrower should always remember that in cases of non-payment of installments, the collateral may be seized to recover the losses of the lender.
Cash advance is a unique loan service offered by many credit card issuing companies. This is one of the easiest personal loan options for quick and hassle-free borrowing. The borrower can withdraw the money via their credit card or from over the counter from banks. The amount that can be given to the borrower is usually the credit limit of the credit card. A lot of people in Los Angeles prefer taking loans in the form of cash advances as it is one of the easiest methods to get a loan. The local customers can visit one of the centers to check cashing in Los Angeles, CA for a hassle-free loan disbursement.
In Spite of a quick and easy way to borrow money, cash advances attract a high rate of interest, and one should always remember that.
Line of Credit
A line of credit or LOC for short is usually an agreement between the borrower and lender; which defines the maximum amount of loan a person can take. With the given condition that he/she does not exceed the maximum amount.
LOC is a type of revolving account. A revolving account is basically an endless stream of money, where you can use it, pay it back and use it again. So LOC’s are a great way to borrow money provided you always pay your installments and borrow within the predefined limit.
Credit cards are one of the best examples of revolving lines of credit. And we all are aware of the benefits of having a credit card in our wallets…!!
Fixed Rate Personal Loans
Personal loans of fixed-rate are the ones in which the interest associated with the principal amount is predefined and fixed. This is a good way to shield the borrower from increasing interest rates. The interest rates for fixed-rate loans is usually a bit higher initially as compared to variable rate loans in order to compensate for the rising interest rates.
These loans are not associated with any type of index and are just dependent on the base rate of interest. The greatest advantage of this type of debt is that the borrower can assess the future payments and plan accordingly, so there are no substantial changes in installment amounts.
Variable Rate Personal Loans
Personal loans with variable interest rates are the ones which the interest associated with the principal amount keeps fluctuating. This variation is based on an underlying standard rate which keeps changing in accordance to the changing interest rates in the financial markets.
Variable interest rate often depends upon the credit credibility of the borrower along with the changing market conditions and the collateral. Such loans usually start off with a lower than the market interest rate for the initial tenure, depending upon the length of the loan. After that, the interest rate begins to fluctuate, and it usually increases.
Short Term Loans
Short term loans are the debts that are to be paid back within one to five years from borrowing. It is beneficial for borrowers who are unable to qualify for LOC. It is a great way to gather some quick money as an investment for any business. Such loans are usually unsecured and do not require a collateral associated with them.
These loans are ideal for business owners as it a quick way to get hassle-free finance. A great benefit of repayment of short-term loans is that it improves the borrower’s credit rating. But all good things have some associated cons with them. In the case of short-term loans, higher than the current market interest rates.
A balance transfer is the transfer of the outstanding amount of one credit card to another credit card. This type of transaction is usually done when transferring from one credit card provider to another. By transfer of balance, the customer usually pays fewer interest rates for some initial time, which is beneficial to the user or even 0% interest for some fixed time.
It is usually done by credit card issuers in order to attract more customers. A balance transfer is always associated with some fees for the customer, usually ranging between 1-5% of the balance amount.
There are a lot of options for personal loans available in the market. But they vary greatly in their requirements, the rate of interests and tenure along with many other factors. Always make sure to make your monthly repayments on time. And choose an option that is suited to your personal needs, compare and then decide.