Different Types of Personal Loans

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Financial emergencies are never welcome, but unfortunately, they do happen. When you’re in need of a solution, you may want to consider taking out a personal loan. The good news is there are a number of options available to you, making it easier to choose one that won’t have a lasting impact on your finances. In fact, so long as you make your payments on time, a personal loan may even raise your credit score and grant you lower interest rates in the future. Explore the most common types of personal loans with the financial experts at Xpress Cash, below.

Unsecured Personal Loans

Unsecured personal loans are more common than other types of personal loans. They don’t require collateral, making them a higher risk for the lender than the borrower. For this reason, unsecured personal loans often come with a higher interest rate, based on your credit score, and ranging from 5 percent to 36 percent. Many prefer this option because it offers a clear payment plan.

Secured Personal Loans

Unlike unsecured personal loans, secured personal loans are backed by collateral, like your auto loan, home mortgage, or savings account. This option is less common at banks and credit unions, but some do offer it. Interest rates on these loans will be lower, but if you’re unable to make your payments, the lender may seize the collateral you provide.

Fixed-Rate Loans

Generally speaking, most personal loans come with a fixed rate, meaning your rate and payment amount remain the same throughout the life of the loan. Like unsecured personal loans, fixed-rate loans are good to consider if you need a structured payment plan. However, they too will often come with a higher interest rate due to additional risk placed on the lender.

Variable-Rate Loans

Variable-rate loans come with an interest rate and payment amount that is subject to change throughout the duration of the loan. Why would someone choose this type of loan? They usually offer a lower annual percentage rate (APR) to start, and sometimes come with a cap that sets a limit for how much your rate can change over a certain period.

Debt Consolidation Loans

Whether you’re paying off outstanding credit card bills or need help taking care of prior personal loans, debt consolidation may be a viable option. A debt consolidation loan essentially takes all of your other debts and combines them in one new loan. Some go this route simply because it’s far less daunting to manage one single payment each month.

Co-Sign Loans

If you need to take out a loan but you have poor credit or no credit history, you may find that you don’t qualify on your own. In this instance, you will need a co-signer who would be responsible for repaying the loan in the future if you were unable to. If the co-signer has good credit, this can help you secure better terms and a lower rate on a loan.

Learn More About Personal Loans with Xpress Cash

With the common types of personal loans explained, we hope you’re feeling better-equipped to make an informed decision on what’s right for you. Always remember to be judicious when applying for a personal loan, as failing to meet payments can have serious ramifications. If you have additional questions on your options, we invite you to contact us or stop by one of our locations in Michigan, Wisconsin, or Idaho!