It can seem like a silly question. After all, isn’t everything we borrow personal? But the fact is, Personal Loans are a specific type of loan, and you’re perfectly correct thinking you might want to know more about them.
We’ll break them down here, and make sure to check out the other links to other questions people have about personal loans.
Let’s Get Personal
We all know about credit cards and car loans. Well, we should know all about them if we have credit cards and car loans. Some of us are even lucky enough to have or know about home loans. Some few of us even know a little bit about business loans.
But personal loans don’t look like any of those. The main reason they’re different is also why they’re called “personal” loans: they are loans to just you, and you can do whatever you want with the money.
Typical loans are only for specific things. A car loan sometimes goes from the bank to the car dealership–we never even see the cash. Same goes for home loans. With a personal loan, the money goes straight to you, and you can do whatever you please with it.
Types of Personal Loans
The two main types of personal loans are secured and unsecured. Secured loans are also known as collateral loans. In general, they have lower interest rates. But you also have to have property to put up against the loan. An unsecured loan comes with higher interest rates, but you don’t stand to lose any property if you can’t pay the loan.
I’ll never write an article with blanket “Never do this, always do that” advice regarding types of loans. But in general, I’d say that if you know for sure you’ll be able to pay the loan back, and you aren’t emotionally attached to the property, collateral loans may be best.
What Terms Do Personal Loans Typically Have?
Right off the top I need to tell you that everyone is going to get a different set of terms, so I won’t set anything in stone, here. Your terms will vary based on your income, your credit score, your occupation, or even based on where you live.
But in general, personal loans range from as little as 12 month terms all the way up to seven years. Interest rates can also range quite a bit, from as low as 5% to nearly 20%.
In general, an unsecured personal loan won’t look as good as your car loan, but they’ll look better than your credit card loans. And, again, a personal loan with collateral will always look better.
Bottom Line: Should I Get a Personal Loan?
If you’re looking for a personal loan, you probably have a really good reason. Whether it’s something serious like a medical bill, or something fun like a vacation you’ve always dreamed of, needing money is a very personal matter, and no one can tell you that you don’t need the money.
If you do need the money, make sure you do your homework–and shop around. You may be surprised at the difference in loan terms, and how good a loan you might be able to get.