The Best Personal Loans For You in 2019
Personal loans are popular financial tools that can help bail consumers out of financial predicaments. There are plenty of uses for a personal loan, and the funds received can be put toward just about anything.
There are several types of personal loans available, and the one you choose should be best suited for your particular scenario. Consider any one of the following personal loan products to help you deal with your pressing expenses.
Wondering if you should choose a balance transfer or a personal loan? Take a look at this.
Unsecured Personal Loans
An unsecured loan is any type of loan that is not backed by collateral. That means that they’re not secured, and as such, the lender is at a greater risk in case the borrower ever defaults. If there is no collateral to repossess, the lender has nothing left to recoup.
As a result of this increased risk, lenders who issue unsecured personal loans typically require loan applicants to have good credit, as well as a low debt-to-income ratio and a decent income. Oftentimes, these loans come with a higher interest rate as a result of the lack of collateral.
Many borrowers like unsecured personal loans because they offer predictable payments and a higher loan amount option. A lump sum of money is provided at the onset when the loan is approved, and a set payment is made every month over the term of the loan. As such, they’re also known as ‘installment loans’.
However, unsecured personal loans can be difficult to get approved for without good credit. Generally speaking, only those with a credit score of at least 680 will be able to secure an unsecured personal loan, though the exact score required may vary slightly from one lender to the next.
Do you know what the true cost of borrowing is? Take a look at this infographic.
Secured Personal Loans
Unlike unsecured personal loans, secured personal loans are backed by collateral. Examples of secured personal loans can include things such as car loans, mortgages, and equipment loans.
While the majority of personal loans are unsecured loans, some lenders will offer personal loans that are secured by an asset such as a savings account. A secured loan is easier to get approved for because it comes with a valuable asset that the lender can repossess if the borrower ever defaults on the loan.
These types of personal loans also tend to come with lower interest rates than unsecured personal loans because of the lower inherent risk that lenders have to assume. That said, there is a bigger risk for borrowers because the asset of value can be lost if payments are not made on the loan.
Click here to learn about asset-based leasing and financing.
Most personal loans come with fixed rates, which means that the interest rate and payment do not change over the term of the loan. Many borrowers like these types of loan arrangements because the payments are more predictable, making budgeting much easier. However, they tend to come with slightly higher interest rates compared to those that are variable in nature because the lender is assuming a greater risk.
To see more differences between fixed and variable rate loans, look at this.
Personal Lines of Credit
A line of credit is a useful tool when you need money quickly and don’t necessarily have time to go through the loan process. With a line of credit, you’ll always have access to funds whenever the need arises, even in last-minute, emergency situations.
Lines of credit work somewhat like a credit card. Your lender will approve you for a specific credit limit, which is the most money you can borrow. You’re allowed to borrow as little or as much as you’d like against your limit, as long as you don’t go over it.
Line of credit or credit card? Read this article to make your decision easier.
You’ll only be charged interest on the portion that you withdraw, and not the entire credit limit. You can continue to borrow against the funds as long as you continue to pay back whatever you’ve borrowed.
Among the more common types of lines of credit is a home equity line of credit, or HELOC, which is a line of credit that is secured by your home. As long as you have a certain amount of equity built up in your home, you may be eligible for a HELOC.
What are the other differences between a personal loan and a line of credit? Find out here.
Debt Consolidation Loans
A debt consolidation loan allows borrowers to pay off all of their high-interest debt and combine it into one loan, usually at a lower interest rate. Not only does a debt consolidation loan allow you to save money by paying less interest, but it also makes it easier to manage your debt.
Choosing The Right Option
Now that you know what options are out there, you need to choose what type of loan will best suit your needs and also decide which lender will be able to meet those needs. To help make that choice as easy as possible, here are a few things all potential borrowers should be cautious of when choosing a lender and applying for a loan.
- Fees. Unfortunately, this is something that many consumers do not take into account. The fees certain lender charge could end up making a loan not as affordable as you thought.
- Interest rate. Both the annual percentage rate (APR) and the monthly charge. It’s important to keep in mind the total cost of the loan over a whole year in addition to the cost per month.
- Reviews. Does the lender you want to work with have good or bad reviews? Or, do they have any reviews at all?
- Extras. Certain lenders may require additional information or documentation from you while others may offer additional perks. It’s always a good idea to take a look at what sets a lender apart from the pack, whether it’s positive or negative.
Are You Ready to Apply For a Personal Loan?
If you’re in need of some extra cash that your bank account is unable to accommodate, consider applying for a personal loan. At Loans Canada, we can direct you to the right type of personal loan that best suits your financial situation. Get in touch with Loans Canada today.
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