You’re not alone if you have unsettled debts that you wish to settle by taking out loans. However, before you take out a loan, it is best to understand the different personal loan options available to you and what they are best for.
GreenSprout is dedicated to ensuring that you make the best financial decisions for your future. Answering some questions, as seen below, GreenSprout has outlined everything you need to know about finding the best personal loan for you in this interview.
What Are The Different Personal Loan Options?
The different personal loan options available include; Secured Personal loans, Unsecured personal loans, fixed-rate loans, variable-rate loans, co-signed and joint loans, debt consolidation loans, and personal lines of credit.
What Are The Different Personal Loan Options Best For?
Secured loans are best for home or auto loans because they offer more significant loan amounts. Unsecured loans are usually used to pay student fees.
Debt Consolidation loans are usually used to pay off outstanding debts by saving on interest. It is not advisable to use debt consolidation loans to pay for credit card debts if you spend a lot because you might only accrue more debts. A personal line of credit loan is best for borrowers who want a safety net to resort to as needed.
What Are The Requirements For The Various Personal Loan Types?
There are different requirements when taking out a loan. Secured personal loans require an asset as collateral, which allows you to lend money without a high credit score. Unsecured personal loans do not need collateral before your loan gets approved.
However, it requires a higher credit score than secured personal loans. A co-signed loan is for lenders who are not qualified for a personal loan.
Our experts at GreenSprout suggest that you get approved if you have a co-signer with a strong credit history and are willing to stand as a guarantor and foot the loan balance if you default on your payments. Joint loans require the two parties to have good credit scores to strengthen their chances of approval. The personal line of credit loan requires you to pay interest only on the amount you draw.
What Loans Should Be Avoided?
One of the loans you should avoid is Credit card cash advances. Some credit card issuers allow you to take cash advances from their ATMs or bank. However, these credits require a high-interest rate on repayment and accrue more debt.
You should also avoid cash advance apps. Some apps give you access to quick cash up to $250. These apps charge a monthly fee to use their services, and you still have to repay the borrowed amount within two weeks or the next payday.
Yet another loan to avoid is pawnshop loans. This allows you to take loans in exchange for your assets. A high-interest rate is imposed, and the pawnshop gets to keep your property if you default in payment.
How Do You Know The Best Personal Loans For You?
When choosing a loan, you should first consider which lender offers a repayment plan and interest rate that you can afford. Some questions you can ask yourself are whether the lender charges early repayment or loan origination fees, whether the lender terms suit your intended use, and whether the lender offers quick funding options.
Also, are mobile apps available to manage your loan as you go, and what are the reviews from current and past customers like? You need to ask yourself these questions before taking out a loan.