Do you need a personal loan?

Before you start applying for a loan, it’s essential to do your research. You need to understand precisely what type of loan you’re getting, so there are no surprises down the road.

Keep reading to learn more about the types of personal loans available, how to apply for them, and which type is best for your unique needs.

Four Common Types of Personal Loans 

There are a lot of different reasons people need personal loans. Sometimes you need extra cash to pay bills, or you have a big home project that you need to fund. No matter what your reason is, your unique financial situation will decide what type of loan is right for you.

Before you sign an agreement for any loan, you need to know what you’re getting yourself into. Here are four common types of personal loans that you need to know about:

1. Secured Loans

A secured loan is backed by something valuable that you own, such as your car or home. If you default on your loan, the lender gets to take the item you’ve secured the loan with.

Secured loans are typically less risky for lenders, which means you can often get them at a lower interest rate or if you have a poor credit score.

2. Unsecured Loans

An unsecured personal loan isn’t backed by any collateral. It’s simply a loan that you agree to pay back in installments with interest. This type of loan is much easier to acquire if you have an excellent credit score.

The amount of loan you qualify for will largely depend on your credit score. Unsecured personal loans can get as high as $100,000 for extremely qualified borrowers. The loan term will also vary but is usually between one to six years.

3. Personal Line of Credit 

A personal line of credit is similar to a credit card. Instead of being given a lump sum loan, a personal line of credit is a certain amount available to a borrower that they can use and then pay back as they choose.

You’ll likely want to have a personal line of credit handy in case of any emergencies. You can visit bonsaifinance.com to learn more about personal lines of credit.

4. Debt Consolidation Loan 

A debt consolidation loan helps people combine their debts into one monthly payment. This typically allows people to pay off their debt faster, so they accrue less interest. If you have credit card debt, medical bills, and other personal loans to pay off, you should consider a debt consolidation loan to help you get your debt under control.

Learn More About Getting the Money You Need 

No matter what your credit score or financial situation, there is a personal loan option out there that will work for you. The key is knowing the different types of personal loans, so you don’t get stuck in a bad situation where you can’t pay your loan back.

For more information about loans, or personal finance tips, make sure you check out the rest of our website.