Personal loans are available for a variety of activities. There are several types of personal loans that you may use to help your finance. But there are significant differences between each type. With this breakdown, you can decide which option is right for you. Before jumping into the types of personal loans, you should consider several things to make sure you get the correct loans. First, you should ask yourself “Should you opt for a longer-term, higher-value loan option or a more short-term one?”
Both personal loans are based on your annual income, credit score, and debt-to-income ratio. A history of numerous payday loans may prevent you from obtaining future loans. Make a list of the pros and cons. Determine how and if you can quickly repay each installment loan based on its different requirements. If you need more help, your lender or loan provider can help you make a final selection. Now, let’s take a look at the common types of personal loans that might be the best solution for you.
Installment Loan
The first type of personal loan is the installment loan. It is the most common type of personal loan. It is a lump sum of money that you can borrow from your lender or another lender. You must pay it back within a certain time. The typical repayment plan consists of a series of monthly obligations.
Because of these predetermined deadlines, you’ll know exactly how much you need to pay back to your lender each month. It eliminates surprises and easy miscalculations. Tight terms allow you to plan better and stay in control of your finances. It’s also an ideal financing alternative for large purchases like a home, car, boat, or trailer.
Line of Credit
A line of credit provides you with cash when you need it. A lender decides the amount approved for a line of credit. You can then draw from this amount when you need it. Your obligations and APR will be different. So, it’s essential to make sure to read the fine print so you are fully informed.
This type of loan can also be called a bank loan. Your amount to borrow can revolve back to the original amount after you pay down the outstanding balance. So, you can borrow over and over again. You can consider getting a line of credit as having a physical credit card. The minimum payments due are not high.
