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What are the Different Types of Personal Loans?

What are the Different Types of Personal Loans?

Are you looking to buy a new car, consolidate some debts, renovate a home, or fund a wedding? If yes, then you might be thinking of taking out a personal loan. You can make large purchases using a personal loan. Moreover, in this blog, you will come to know about different types of personal loans.

What is a Personal Loan?

Personal loans are used for various things, but generally, they are used to make expensive purchases, such as a car, renovating a home, paying for a wedding, or paying emergency bills. They can also be used for consolidating debt. It means, there are different types of personal loans used for a number of different situations.

Different Types of Personal Loans

Whether you are applying for a loan for a new car purchase, home renovation, overseas trip, or debt consolidation, knowing the type of loan that you should take can help you avoid possible financial issues in the future.

  • Variable vs. Fixed-Rate

When you apply for a loan, you will come across a few terms such as fixed rate and variable rate. Variable interest rates mean that your repayments will vary over time if the interest rates decrease or increase. It means that when the interest rates increase, your repayments will be higher. On the other hand, fixed interest rates mean that repayments will not vary throughout the loan term. One of the primary benefits of this type of loan is that you will always know how much you will have to pay.

  • Secured Personal Loan

A secured personal loan is the most common type of personal loan secured against something you own. In simple words, you may have to put something as security to borrow money, such as property, high-value assets, or a vehicle.

  • Unsecured Personal Loan

As the name suggests, an unsecured loan doesn’t require you to put something as a security. You can take out a loan, but you may have to pay a high-interest rate and higher fees as compared to secured loans.

  • Debt Consolidation Loan

It is also known as a refinancing loan. Debt consolidation loans involve rolling various debts into a single loan. Although this can offer an easy and practical way to manage repayments.

  • Loan with a Guarantor

This type of loan involves a close friend or a family member of the borrower as a guarantor. The primary role of a guarantor is to manage the loan’s repayments if the borrower fails to manage them. Since this approach minimises the risk for lenders, loans with guarantors come with lower interest rates.

What are Personal Loans used for?

A personal loan can be used for:

  • Home Renovation

If you feel that your home needs improvements, but you lack enough funds for home renovation, then you can apply for a personal loan.

  • Holiday Break

If you are going on a holiday, you can apply for a personal loan to cover your upfront costs and repay your personal loan when you return.

  • Pay for a Wedding

Organising a big event like a wedding can be expensive. A personal loan can help you organise a big event or wedding.

  • Debt Consolidation

If you are stressed about different debts, repayment dates and different interest rates, then you can take a personal loan to pay them all off.

  • Buy a Car

For many people, buying a car is an expensive thing. If you don’t have enough savings to buy a car, then you can take a personal loan.

What Type of Loan is Easiest to Get?

You can get small amounts of loans more easily because when you apply for larger personal loans, then you have to meet strict eligibility criteria.

What Kind of Loan has the Lowest Interest Rate?

If you want a lower interest rate, then it is advised to get a secured personal loan as lenders consider secured loans less risky and borrowers have to make repayments to avoid losing their collateral. This lower-risk loan could increase your chance of approval if your credit score is not as high as you want.

Conclusion

You can get a personal loan for buying a car, wedding, home renovation, or debt consolidation. You can reach out to Star Homeloans if you are looking for an appropriate personal loan. Contact us today to lock the deal today.

Other Useful links:-

Personal Loan Broker

Home Star Home Loans

 

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