Every now and then, one faces circumstances that necessitate financial resources in order to get through. But not all the time one has sufficient available resources to deal with these situations. In times like these, filing a personal finance loan application can become one’s lifesaver.
There are actually various types of personal financing loans to choose from depending on one’s specific needs and reimbursement ability.A personal loan is a type of financing provided by banks and financial institutions that can be availed for various purposes. Nowadays, institutions that offer personal financing are banks, companies at brick and mortar places or online and credit or lending unions. Personal loans are generally divided into two categories: the secured and the unsecured personal loans.
Secured vs. Unsecured Personal Loans
On one hand, secured personal loans essentially require collateral backings that are owned or managed by the borrower. These items may include one’s real estate properties, a car, boat or other financial assets. In the event that a borrower fails to reimburse the payment imposed by the financial institution the borrower may lose these assets to foreclosure.
On the other hand, unsecured personal loans do not require any form of collateral backing and is principally based on the worthiness of the borrower. But since the risks involved on this kind of loans are high one should expect that the personal finance loan rates for its interest are higher too. In case the borrower fails to reimburse the borrowed money the lender can opt for legal claims.
Popular Types of Personal Loans
Popular personal loans that many people make at some point in their lives include convertible loans, fixed-rate loans, installment loans, payday loans, single-payment loans and variable-rate loans.
Convertible loans are commonly used in business. This loan gives borrowers the option to convert all or portions of the outstanding principal of the loan into a form of an equity position in the company where the borrower is working.
Fixed-rate loans are the most common type of personal loans. The interest rate of this loan remains constant or fixed allowing the borrower to pay the same amount of payment on the agreed time until paid in full. Even though fixed-rate loans’ interest is higher, many people still prefer this type of loan because if offers more security.
Payday loans or sometimes called “cash advance” are considered to be one of the most expensive loans one could make. Interest rates for payday loans are particularly high and include unwarranted fees. Reimbursement for payday loans is usually secured against the borrower’s next paycheck. Since this loan is expensive, this should only be used in times of emergencies only.
Single payment loans are also called “bridge loan” or “interim loan.” This type of loan is generally used for short-term financing and the interest is reimbursed in one lump of payment at the end of the agreed term. A payday loan is actually an example of a single payment loan.
Variable-rate loans are quite risky type of loans for borrowers because interest rates of variable-rate loans voluntarily adjust at different intervals throughout the existence of the loan based on the market. Many people still opt for this type of loans because the initial interest rates are usually lower.
How about personal finance loans for people with bad credit?
Sometimes, people with bad credit or those who have low credit score find it problematic to get financial assistance from banks and financial institutions. However, there are actually many personal finance loans online that are willing to assist people in getting financial assistance. These online lenders can offer bad credit loan to anybody in need in times of crises.
Searching through the web is one of the quickest ways to find a company that is willing to give loan approvals even though the borrower has current unpaid debts and has low consumer score. However, these types of loans call for higher interest rates and fees.
Loans can be a lifesaver in times of financial crises and emergency cases. Accordingly, it is important one should make sure that he or she chooses a financial institution that is trustworthy and have a strong reputation in the industry before deciding to apply for a loan.
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