There are many situations in life when you may need some extra money, whether to pay for a wedding, fix a broken pipe, buy a new car, or buy someone a special present. But when you don’t have the cash available, you may want to use personal financing options.
Personal loans are popular because you can use them for whatever you want. They provide quick access to money, they usually have lower rates than you would get with your credit card, and the rates are usually fixed. But there are other options as well that you may want to consider.
So what are your options for getting access to finance, and which is the right one for your situation? Here’s a look at the various different personal financing options you can consider.
Let’s start with the most familiar. If you have a bank account, you will probably have been offered loans in the past, or you will at least have seen them advertised.
Bank loans come from a trusted lender. You may get a better rate of interest if you have been a customer for many years, and they are also good for getting large loans. But they may be harder to qualify for, and you will usually need a good credit score.
This is a fairly new type of personal lending that is sometimes called social lending. It is often carried out through a website where lenders are connected to borrowers.
It can provide a good rate of interest, but there are various factors that will determine if you can get one like your financial history and your debt-to-income ratio. You may also need to provide proof of income.
There are no penalties for prepayment of your loan, and you can often get large loans, even as much as $100,000. But usually this type of loan is more suitable for people with high incomes and good credit scores.
This is a very different type of personal loan that usually involves small loans with high rates of interest. The idea is that you borrow the money to cover an expense and then pay it back when your next payday arrives.
This can be useful for unexpected expenses, if you have a bad credit score, and if you are sure you can pay it back quickly. They are fast to get hold of and lenders do not check credit scores, hence the high interest rates.
However, if you don’t pay it back when due, the interest can add up very quickly. There are many lenders providing payday loans, so always look around at your options before choosing one, and make sure you will be able to pay back the loan on the due date.
This is a loan that is used for a very specific purpose. As the name suggests, it is used to buy a car. Cars are a large expense for most people, and when you buy one, you may be offered a loan by the place where you are buying the car.
This is obviously a convenient option, but it may not be the most suitable. Instead, you may want to look at your other options.
Browse the web and look at sites like Auto.Loan. You can choose from various lenders based on their interest rates and terms, and it may be a more affordable way to access a loan for your car.
Secured Personal Loans
Personal loans are usually unsecured, but there are exceptions. Secured personal loans are when you provide an asset that you own as security. This could be your car, your home, or something else. This is used as collateral, and if you fail to pay back the loan, you risk losing it.
The benefits are that you may be able to get a lower interest rate. However, the risk is obviously that you could lose something of value if you are unable to pay it back.
Another type of personal secured loan is the type you can get at a pawn shop. Here, you will be given a loan after providing the pawnbroker with an item of value, like some jewelry. When you pay back the loan, you will get your item back, and the rate of interest is often high for this type of loan.
Find a Suitable Personal Loan by Looking Around
Personal loans can be useful when you face an unexpected expense or you really want to pay for something that you cannot afford in the moment. As long as you can pay back the loan according to the terms, they can be very useful.
However, because there are so many options available, always carefully consider which is the best option for you in your circumstances. This will depend on your reason for using the loan as well as your financial situation. Then choose the most suitable type of personal loan as well as the most suitable lender to ensure you end up with the best loan for your circumstances.
Jayden Curtis works as a personal finance consultant and shares some top finance tips around the web.