Education Center
Loan Calculators
Personal Loans Are Quick Options for Many Circumstances
Personal loans are like everything else in life. They come in different sizes and styles. They can be divided into two main categories: short term loans and long term loans. Short term loans are designed to last for only a few years or less, while long term loans are designed to last for as many as ten years. The type of loan that you get is usually decided by its purpose- a trip, a bit of home remodeling, or repairs for a car. One of the best facets of personal loans is that they are easy and quick to obtain.
Short Term Personal Loans
Although most short term loans are obtained with the final repayment due in three to five years, a variety of terms are available depending on the borrower's needs and the lender's conditions. Applying for a short term personal loan can be done over the Internet or in person, depending on the lender. It's a quick process requiring minimal personal information.
Typically, short term personal loans provide a small amount of money for a short amount of time. The interest rate is usually a bit higher than the rate attached to long term personal loans and it is directly linked to the borrower's credit score. The higher a borrower's credit score is, the lower the interest rate he can obtain. On the other hand, the lower a borrower's credit score is, the higher the interest rate he can obtain.
Also included in short term personal loans are payday loans. Payday loans are secured loans with a repayment date of one to two weeks. The borrower must put up a check or bank account that will cover the loan plus fees as collateral. If he cannot make the payment when it comes due, most payday lenders will roll the loan over for an additional fee. Even people with bad credit can get payday loans. As with any loan, bad credit scores will lead to high interest rates.
Long Term Personal Loans
When a larger sum of money is needed for a longer period of time, long term personal loans are the best option. This type of loan is available as either a secured or an unsecured loan.
Secured loans typically have better terms, lower fees, and more affordable interest rates. The collateral on a secured long term personal loan varies and can include a home, car, jewelry, fine art and antiques, or some other valuable that covers the amount of the loan. The use of collateral protects the lender in the event that the borrower does not repay the loan in full.
The amount of money that someone can borrow is linked to their credit score. Individuals with high credit scores will qualify for higher amounts of money with lower interest rates. Those individuals with bad credit scores can still qualify for a long term personal loan, but it usually provides a smaller amount of money and a higher rate of interest.
Unsecured loans do not necessitate the use of collateral. However, this typically comes at a price. An unsecured loan is usually more expensive since the fees and interest rates are higher. Plus, the amount of money that the borrower can take on loan is usually much less than the amount provided with secured loans, depending on the individual's credit score. Plus, the repayment of the loan is usually due within a shorter period of time.
