Gone are the days when personal loans were perceived as bad debt. In fact, personal loans are a smart way to manage funds in the present scenario. They are a form of debt from a bank, a credit line association, or an online lender that comes with one-time lump sums. In some cases, you have to pay fixed minimum monthly payments, while with Stashfin, you get a flexible repayment option. This implies that you can repay according to the availability of funds at your end. Some lenders do charge additional fees on personal loans, for example, an origination fee and a one-time administrative fee upon using the loan money for the first time. On the contrary, Stashfin gives you the liberty to pay interest only on the withdrawn amount of the loan issued.
Since personal loans are unsecured loans, thus you do not need to pay any collateral to apply for a loan. All you need is a good credit score and a consistent credit history. Even if you have bad credit or you wish to start building your credit score, some lenders and applications also assist in the same. Personal loan interest rates may vary according to the loan amount issued. Still, the best part is fast personal loans can give you funding within a minimum timespan, acting as a savior in times of dire need. Let us explore more about the types of personal loans and which one is best suited for which personnel.
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Types of Personal Loans for Different Credit Profiles
Personal loans come with high flexibility with respect to interest rates, terms & conditions, and different credit profiles. The first thing of the utmost importance is knowing your credit score. Your credit score helps you decide whether you should get an unsecured or secured personal loan and whether you can go for a joint or a co-signed loan. Secondly, you must have clarity on your financing needs and financial goals before applying. This will also help identify the loan that is the best fit for you. Here are the types:
- Unsecured Personal Loans:
This type of personal loan does not require any collateral to get approved. You qualify for the loan on the basis of your credit score and income only. If you hope to get a good amount of loan at the best rate, then you typically need an excellent credit history. Some lenders also consider your employment and educational background. The best part of getting this loan is that you do not have to risk any asset, but if you fail to repay, you will damage your credit and might face legal proceedings.
This is the best choice for those who have a good credit history and a promising repayment potential, i.e., a low debt-to-income ratio.
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- Secured Personal Loans:
Requiring collateral for approval, secured loans are just like mortgages. But the good part is that rather than being backed by a property or a house, a secured personal loan might also be granted on the basis of a Certificate of Deposit (CD) or a savings account.
Now, since the loan is secured, there is a low risk on the lender’s part, thus, they might offer low interest rates. But if you fail to repay, you might lose the asset that you put up as collateral. This type of personal loan gives lenders legal permission to seize and offset your asset upon failure in repayment.
It is the best option for people who have a low credit score or are sure to repay the loan.
- Debt Consolidation Loan:
If you wish to save on interest, then this can be a good choice. Debt consolidation loans combine multiple loans into a single payment, allowing borrowers to repay outstanding balances faster. The concept is to take a new loan at a lower interest rate to repay other current debts, for e.g., credit card bills, medical bills, etc.
This new loan will come with an origination fee, and the most important thing you need to ensure is that you have to manage this loan efficiently so that you do not end up in new debt. This type of instant personal loan is the best fit for ones with multiple streams of high-interest debt.
- Joint Loans:
If you can not get a loan on your own, then get a credit-worthy partner for a co-signed or Joint Loan. The person who co-signs the loan must take equal responsibility for repayment of the loan, without getting access to the funds. They act like a person who takes the guarantee of repayment. Upon failure of repayment, both you and the co-signee gets their credit score harmed.
Some lenders also offer joint loans to allow both the borrowers to access the loan funds, and in this case, both the borrowers will be liable for loan repayment. It is the best choice for someone with a poor credit score who is unable to get the loan amount required.
- Variable Rate Loans:
When the personal loan interest rate fluctuates on the basis of the market condition, then the type of loans are called as variable rate loans. The chances are that you might get to pay a low APR (It’s a percentage that represents the yearly cost of a loan or credit card, including the interest rate and any additional fees or costs) but the downside to it is that there are also the chances of getting the variable rate increased.
Since the payments change over time, such personal loans are recommended to be taken for a short predicatable term only. If you fail to pay it off faster, then you might get into the fiasco of paying the increased rate of interest. This is a high risk loan that is a good option for those seeking an inexpensive, short-term loan.
- Personal Line of Credit:
This works just like a credit card. The personal line of credit gives you access to money that can be borrowed easily as per the need and you only pay interest on the amount you borrow. So, if you are looking for a flexible access to funds instantly, and want a better rate of interest that the credit card, these type of loans are a perfect match for you. Be it a kitchen or a bathroom renovation, or a sudden travel plan or any medical emergency, Personal lines of credit come at variable rates and can be secured by a banking asset, but you may be able to find unsecured options with online lenders or smaller banks.
Of all, this is the best option for people who need flexible loan access and a flexible repayment tenure at a rate better than a credit card.
We hope you a better picture of the types of instant personal loans that can be a good choice for you. Thank us Later!