In an ideal world, no one would need to make a loan. However, this is not the world we live in. This world that we live in runs on money and the loan options are so numerous that one can easily be at a loss on the subject.
Here is an overview of different loan options and what these mean for you.
Personal Loan Or Line Of Credit
A personal loan resumes itself as a lump sum of money deposited in your account. It is ideal for a big, one-time purchase. The interest rate can be either fixed or variable, depending on your loan. With a bank, the minimum amount you can borrow is usually $3000. With an online cash loan, the minimum amount usually starts at $500.
A personal line of credit is for on-going purchases, as it is reusable. You only pay interest on what you use, not the whole amount you are approved for. The interest rate is variable, and the minimum amount to borrow is about $5000.
Secured Or Unsecured
A secured loan or line of credit uses collateral as a guarantee. Though the approval process can be longer than with an unsecured loan, the interest rates will be lower. The downside to secured loans is that you might lose your collateral if you do not make your payments.
Getting an unsecured loan or line of credit is harder than getting a secured one. Having no collateral, you need a good credit score, but the approval process is faster and needs less paperwork than with secured loans. Keep in mind that in the case of online personal loans, your credit score does not matter. They only check if you have a steady job and have the means to repay the loan.
Fixed-Rate Or Variable-Rate
The interest rate can be fixed for the whole term of the loan. It is a good option if your interest rate is low and you want to keep it that way. When planning to repay the loan on a longer term, this might be the way to go. It is perfect if you have a budget and like to know the exact amounts you will need to pay over the period of the loan.
A variable interest rate is useful if you know that interest rates will get lower and if you do not plan to keep the loan over a long period.
Open Loan Or Closed-End Loan
A closed-end loan means that if you pay more than the fixed monthly amount, or try to pay off the loan early, you will get a penalty fee.
An open loan gives you the freedom to make more significant payments each month or to pay off the loan completely whenever you want.
Whichever type of loan you decide on, it is essential to understand all your options beforehand. Analyzing your situation and your needs is the best way to make an informed decision.