All of us run into financial hurdles some time or the other. As an economic privilege, a personal loan can come to the rescue to bail us out of these hurdles. Based on your financial profile and needs, you can borrow any amount, ranging from a few hundred dollars to as high as $100,000. The repayment tenures also vary significantly for these loans.
So, it’s worth exploring the different types of personal loans you can qualify for. Borrowers habitually reach out to Alpine Credits to know about the personal loans Alberta offers from different banks.
In this article, you will learn the different types of personal loans. This way, you can make an informed decision before you commit yourself financially.
What are secured and unsecured personal loans?
Personal loans can be secured or unsecured based on whether or not the creditor demands some sort of collateral from you.
1. Secured personal loans
When you apply for a secured personal loan, the creditor would ask for security from your end. So, you may have to provide the financial institution with access to your bank account. Alternatively, they might ask you to keep a valuable asset with them as collateral for your loan.
For banks, you need to provide access to your savings account, while pawn shops accept valuables. Even boats and RVs can be your collateral in these cases. In case you fail to repay the loan, the creditor would confiscate your property.
Pros
- Since you provide security or collateral, the interest rates are low.
- Based on your collateral value, you can apply for a more significant amount.
Cons
- This type of loan brings you the risk of losing your property on failing to make the repayment.
2. Unsecured personal loan
In the case of an unsecured personal loan, the creditor would evaluate your financial strength based on your credit score. So, you need not provide any security or collateral. Your financial health would determine the amount you can borrow.
The interest rate would be lower in case your credit score looks good. Besides, you can even qualify for an unsecured personal loan if you have bad credit. However, the interest rate, in this case, would be much higher.
Pros
- You can qualify for the loan even if you don’t have any valuables to provide as collateral.
- With a good credit score, you can obtain a loan at a low interest.
Cons
- With a poor credit score, the interest rate would be high and the eligible amount would be low.
Types of personal loans based on their uses
With a personal loan, you can obtain a lump sum amount of money that you can use for any desired purpose. Based on the use, there are the following types of personal loans.
1. Credit builder loans
In case you are applying for a loan for the first time, you can opt for a credit builder loan. Besides, these loans can help you improve your credit score too. You need to secure these loans using your savings account. However, depending on the terms of the loan and the creditor, you can also obtain an unsecured personal loan to build your credit.
Your credit score keeps improving as you make the payments on time. This way, you become eligible for other financial privileges from the major banks. You can also take a short-term loan under this category and pay off the amount in a few months.
2. Debt consolidation loans
Some individuals opt for taking a personal loan to combine multiple outstanding amounts. For instance, you can use a debt consolidation loan to pay off your utility dues, credit card dues or manage medical expenses. Now, with the number of loan accounts reduced, you would have a better credit score. Also, rather than managing several loan accounts at a high-interest rate each month, you need to make a single repayment to the creditor.
The core idea behind consolidating your loans is to reduce the number of credit accounts and pay lower than whatever you are currently shelling out. This way, you can save hundreds of dollars on interest.
3. Vacation loans
Many people seek personal loans to manage large expenses that incur during vacations. Generally, these loans are unsecured, and the tenure lasts from a few months to several years. While you enjoy your holidays travelling to distant places, you can break down the travel expenses into small manageable amounts.
Instead of stressing yourself financially by trying to save for a vacation, you can get a personal loan to manage the expenses.
4. Wedding loans
As the name suggests, wedding loans can help you manage your expenses during wedding events. These loans are unsecured, and the interest rates are relatively high. However, you can qualify for a low-interest personal loan for the wedding if your credit score looks healthy.
Considering the massive amounts of expenses that you need to make during wedding events, it makes sense to go for these loans. In case you already have some savings for your wedding, you can get a small personal loan to make up the deficit.
5. Personal line of credit
You can also consider getting a personal line of credit to manage different expenses. These loans serve as a credit, where you can gain access to funds that you can use as per your needs. However, you need not pay interest for the entire amount you are eligible for. Rather, you need to pay the interest only for the amount that you use. The interest rate would be applicable only for the duration that you use the funds.
This type of loan would be fine for you if you are looking for a safe pool of funds to tap under emergent conditions. Besides, you can use the amount for home renovation or other personal expenses.
Endnote
A personal loan can help you ease up your financial burden significantly, serving multiple purposes. Based on your requirement and credit score, you can apply for a suitable loan amount. Established companies like Alpine Credits can help you select from low-interest personal loans, where you can manage the EMIs with ease. Working closely with one of these professional companies, you can make the right financial decision.
