Types of personal loans
Wednesday September 3, 2008
Personal loans come in many different types, with most personal loans consisting of a combination of a few types of personal loans. Depending on your financial situation and your goals, the type of personal loan you will need for one purchase can differ significantly to what would be appropriate for another purchase. Certain combinations of types of personal loans have a tendency to be better for particular reasons, but as always the financial circumstances of the borrower will have an effect on which types of personal loans are optimal.
Fixed interest personal loans
Fixed interest personal loans can provide stability during times of rising interest rates. They may be higher than the variable rate at the beginning of the loan, but if interest rates rise quickly in that time fixed interest personal loans can be good value. Many lenders only offer fixed interest personal loans so that borrowers can be sure of the payments they need to make. Some fixed interest loans do not allow for extra repayments, however.
Variable interest personal loans
Often providing good value for the time, variable interest rate personal loans can fluctuate over the length of a loan. This means that repayments could potentially rise, but most variable rate personal loans allow for extra repayments to be made so that users can prepare for times of higher rates.
Secured personal loans
Secured personal loans give the lender some guarantee that they can safely lend the money, thus allowing for lower interest rates. The establishment and exit fees for such personal loans can be high, however. Secured personal loans are very popular for use as personal car loans.
Unsecured personal loans
Unsecured personal loans don't risk any specific assets if you default and they can have lower fees than secured personal loans. People often take these out for short term loans of small amounts of money.
Please visit our comparison page if you would like to compare personal loans.