5 Common Types Of Personal Loans

Posted on: 15 December 2015

Are you looking to receive a bit of extra cash for a brief period of time? Then you should consider taking out a personal loan. However, the types of loans that you can take out can be a bit daunting. However, this brief article should serve to inform you of what type of personal loan you should take out. There are a number of different types of personal loans for you to choose from.

Home Equity Personal Loan

A home equity personal loan is a type of finite loan where you will receive an amount (usually a quite sizable amount, at that) amount of money, where the collateral for the amount you receive is your home itself. The collateral portion is the negative side of this type of loan. Most people are quite reticent to use their place of dwelling as a piece of collateral simply to secure a chunk of change (however ample that chunk of change may be). However, it should be noted that home equity personal loans generally have a long payback period and very low interest rates.

Short-Term Loan

A short-term loan tends to be a loan that you will pay back anywhere from a 90 day period to as long as a 15 year period. The amount that you can receive on a short-term loan is usually quite small, as you usually have a shorter time span in which to pay the loan back. It should also be brought to your attention that short-term loans have quite low interest rates, as well, so you won't be gouged in that regard.

Pay Day Loan

A pay day loan is a loan that you take out which you will need to pay back on your next pay day in order to avoid penalties. Pay day loans operate by you being given a lump sum of the amount of the loan you want taken out on the spot – same day. You will write a check out to the lender for the amount of the sum you wish to take out in addition to the amount of interest that is charged to the amount. From here, the lender will wait 2 weeks before cashing the check with the amount of the loan plus the interest attached.

Bad Credit Personal Loans

A bad credit personal loan is exactly as it sounds: it is a personal loan for those lendees out there who have bad credit. It is highly recommended that those with bad credit use another avenue to improve their credit scores. Bad credit personal loans usually operate on short term scale operations, from anywhere from 6 months to a year. During this time, a significant amount of interest is attached and invested in the loan. Bad credit loans should be avoided at almost all costs.

Second Chance Personal Loans

Second chance personal loans operate under the same umbrella as bad credit personal loans, but are a bit more secure. They operate under a longer period of time and, generally speaking, much lower interest rates. Second chance personal loans can also be a solid way of re-establishing a good line of credit. Second chance personal loans are usually available at your local bank or credit union. Keep in mind that second chance personal loans tend to be smaller loans. 

There are a variety of different types of personal loans that you can take out when you need a bit of cash. Knowing your different options when it comes to personal loans will ensure that you take out the loan that is best for your situation. 

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