Personal Loans: Which Kind Is Right for You?

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There are some expenses that don’t fit into our budget, whether planned (like a vacation, wedding, or new TV) or unplanned (like when your car tire needs replacing or you have a medical emergency). Personal loans can come in handy at times like these.

When you need extra money, a personal loan can help you cover the expense.

There are many types of personal loans available, and the kind of loan you can get depends on your credit rating.

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The Personal Loans That Are Available to You When You Have a Good Credit Score

Folks with a good credit score can easily secure a loan from banks or lenders with favorable terms, such as a longer repayment term and lower interest rates. A good credit score above 660 also allows you to borrow more money.

Personal Loans Can Be Secured or Unsecured

A secure loan is backed by collateral. You use an asset like your house, car, or savings account as surety that you’ll repay the loan. The bank or lender will keep your asset if you don’t pay back the loan and interest in full.

Unsecured loans don’t require collateral. But since they are riskier, they usually come with a higher interest rate.

Most personal loans are installment loans, meaning that you receive a lump sum but have to pay the loan back in monthly installments until it is paid off.

The terms of both secure and unsecured loans vary by lender, state, and credit score. As an example, for installment loans Kansas City, the average interest rate is different from what is Maine or Kentucky. The timeframe you have to repay the loan varies and can be between one to five years.

The Personal Loans That Are Available to You When Your Credit Score Is Poor

While it’s difficult to secure a personal loan with a bad score, which is anything below 650, it’s not impossible. People with poor credit scores typically look for lenders that don’t do a credit check. Your options are limited, though, and the amount you can borrow is lower.

Using Payday Loans as Personal Loans

Payday loans are unsecured and offer you loans based on your income. You can apply for a payday loan online or go to a lender that provides this type of loan. The process is quick, and you can be approved within minutes. You can get the cash immediately, or you can get it within the same day if you’re applying online.

To qualify for a payday loan, you must be older than 18. You must prove that you have an income and provide the lender with proof of your identity, phone number, address, and bank account.

While a convenient option, you must be aware of the terms when you’re using a payday loan as a personal loan. The interest rates are high and you have a short period to repay the loan. You usually with your next paycheck or within two to four weeks. Failure to pay results in the loan being rolled over and more fees added.

Pawnshop Loans

Another option is a pawnshop loan, which is a secure loan. When you need cash and have a poor credit score, you can take your valuable item like a laptop, TV, or watch to a pawn shop and use it as collateral to get a loan. The pawn dealer evaluates your item to determine the

Pawnshop loans also have high interest rates and can also add additional fees for insurance and storage. You typically have one to two months to repay this type of personal loan. If you can’t, the pawn dealer will keep the item you placed as collateral.

Conclusion

Refer to this brief guide when you need a personal loan for any reason, whether to pay for braces for one of your offspring, take a much-needed vacation, or expand your online business.