Best Type of Consumer Loans
If you have ever considered getting a personal loan, but did not know much about the types available to you, then you should know that you have several options. While it is true that there are really two main kinds of personal loans, in addition there are other kinds within those types. The key two are secured loans and unsecured loans.
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With a secured loan, you must provide collateral in order to obtain the loan. You can use any kind of financial asset, like your house or car, or even your boat, if you have one. The creditor who distributed it to you will keep the asset you provided as collateral, and they have the right to resell your collateral to regain the money they lent you, if you default on a secured loan. This is commonly seen in the form of foreclosed homes and repossessed cars. If selling your collateral does not result in the creditor receiving the full amount they let you borrow, they can obtain something called a deficiency judgment against you for the rest of the money.
Because the only thing you need to secure it is your signature, getting an unsecured personal loan is slightly less complicated. Generally, you might be awarded the financing based upon your credit, so making certain to get the best credit it is possible to before applying for an unsecured loan will assist you to avoid issues in obtaining it. Unsecured loans, however, will also cost you because of the higher interest rate. The creditor is at more of a risk because they do not have any of your assets to sell in case you default on the loan, which is why they must charge more interest.
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The lender does not ask specific questions about what the loan will be used for. That is the good part about personal loans. However, you are not able to borrow as much as you would be able to with, say, a small business start-up loan because it is implied that personal loans are for smaller purchases like computer or vacations.
In the secured and unsecured realm of loans, there are numerous kinds of loans you can aquire for various reasons. As an example, a house equity personal loan could be considered a secured personal loan, secured by your home equity. If you were to default on this type of loan, you would lose your home. If you follow the terms of the loan correctly, your interest rates are lower and you might be allowed to borrow a large amount of money, on the plus side, however. You may also expect to get more time to repay the financing, which means your instalments will likely be low.