Borrowing money is expensive. The average credit card interest rate is 20.30%.
Personal loans offer financial flexibility, allowing you to use and pay back funds as needed. The drawback is the interest.
If you’re considering a personal loan and want to know the costs involved, read on. We’re reviewing the different types of personal loans, helping you choose the best option for your financial needs.
Fixed-Rate
Fixed-rate is one of the best personal loans and the most common type of loan available today. They typically have a fixed interest rate over the life of the loan, meaning that the monthly payments will remain consistent. Fixed-rate loans also typically have a consistent repayment term, commonly 5 to 7 years.
Variable-Rate
Variable-rate loans have an interest rate that can change during the loan depending on the overall market. The rate can shift up or down and will be determined by the loan originator. It is riskier as often the rate can increase, causing the loan payments to rise.
Once you understand what type of loan you need and what features you want, view loan lender options and find the best loan for your situation.
Debt Consolidation
Debt consolidation is a type of personal loan that allows individuals to pay off existing debts from multiple creditors at once by combining them into one new loan. This type of loan helps simplify multiple payments into one monthly payment with a lower interest rate and provides better organization for individuals to keep track of their debts.
No matter what type of personal loan is chosen, it’s important to research and shop around to make sure the best terms are available.
Peer-To-Peer
These loans involve a borrower who will receive the funds and a lender who will provide the funds. The lender is an individual investor looking for a return on their investment, either through an interest rate return or a combination of both an interest rate return and equity in the supplying company. Borrowers looking for a P2P loan may find excellent interest rates and repayment options that are available with personal peer-to-peer loans.
Payday Loans
Payday loans are a popular form of personal loan, especially for those who are looking for quick, short-term solutions to an immediate financial need or emergency. A payday loan is an advance repaid within a few weeks, with interest and fees. These loans are known for having higher interest rates than other types of loans since they have shorter repayment periods.
These loans may also require a borrower to put up some type of collateral or have a guarantor, depending on the lender.
Identifying Types of Personal Loans
Personal loans come in many shapes and sizes. With the right knowledge and research, anyone can find the loan that best fits their needs. Don’t forget to consider interest rates, repayment terms, and fees when selecting the types of personal loans for you. Start researching the types of personal loan options and make the right choice today!
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