Personal Loans are loans that are easily available and help you fulfill a number of needs. Personal loans are not taken out for a specific purpose. You may take out a personal loan to fulfill all your big and small needs. You may avail a personal loan to consolidate your debt. A cheap personal loan can be used to pay high rate credit card dues. Moreover, you will need to repay the loan to just one lender.
A personal loan may also be used to improve your credit score. If you have a bad credit history, take out a Bad Credit Personal Loan and repay the loan as per the loan terms. This will help you improve your credit score. This article explains various types of personal loans. Personal loans are broadly classified as secured and Unsecured Loans.
Secured Personal Loans
Secured personal loans require collateral and carry low rates of interest. Secured personal loans offer flexible repayment terms. The amount of monthly payments is small in case of secured personal loans.
Unsecured Personal Loans
There is no need to offer your property as a security in case of an unsecured personal loan. The rates of interest on unsecured personal loans are higher than the rates on secured personal loans.
Based on the rate of interest, personal loans can be classified as fixed rate personal loans and adjustable rate personal loans.
Fixed Rate Personal Loans
In case of fixed rate personal loans, the rate of interest and the amount of monthly payments remain the same throughout the loan period.
Adjustable Rate Personal Loans
The rate of interest on an adjustable rate personal loan keeps on changing as the average rate prevalent in the market changes. Consequently, the amount of monthly payments also fluctuates throughout the loan period.
Based on the mode of repayment, there are three types of personal loans – installment loan, balloon loan and single payment loan.
In case of this type of personal loan, the loan amount, along with its interest, is repaid in the form of monthly installments until the loan period expires.
Only the interest is paid at regular intervals and the entire principal amount is repaid at the end of the loan period.
Single Payment Loans
The entire principal amount as well as its interest is repaid at the end of the loan period.