How to Choose a Personal Loan

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There are many reasons you might need some financial help: home repairs, car purchases, weddings, college tuition, and everything in between. Whatever your reason, a personal loan is one of the most common ways to get the funds you require. Choosing the right one depends on your financial situation, and Liberty Lending Group can help you review your options.

Secured or Unsecured Personal Loan

Secured loans are backed by an asset of value that you own. For example, if your car is used as collateral for the loan and you default, then the lender can seize your car. You can obtain this type of loan from most credit unions, banks, or online lenders.

Unsecured loans, on the other hand, are considered riskier for lenders because they are not backed by collateral. To offset this, lenders will typically offer higher interest rates than they would with secured loans. Your credit score will determine whether or not you are approved for the loan and what rate you receive.

Student Loan

If you need money to pay for school, there are both secured and unsecured student loans available today. Depending on your financial situation and the amount of money you need, this may be a good option. It is especially important to review interest rates to make sure you are getting the best option, as the interest can build while you are in school and your loans are deferred.

Fixed vs. Variable Rate Loans

Fixed rate loans offer an interest rate that does not go up or down during the entire duration of your personal loan. Fixed rate loans allow you to make the same payment every month until your debt is paid. You will not have to worry about changing interest rates that can increase your monthly payments, as well as the overall amount you owe.

Variable rate loans, however, have changing interest rates. This means that, depending on the loan terms and benchmarks, your interest rate may fluctuate. There is typically a limit to how high your rate can go over the duration of your loan. A variable rate loan may be a good option for you if you have a short-term repayment period, especially since this doesn’t give much time for the loan to gather much interest.

Co-Signed Loan

A co-signed loan is a good option if you do not have a long credit history or are unable to qualify by yourself. With this type of loan, your co-signer agrees to repay your debt if you are unable to make payments. The co-signer is essentially a form of insurance for the lender to know that they will get their money back.

Debt Consolidation Loan

If you are in need of debt relief, a debt consolidation loan could be the best personal loan option. This debt relief loan combines all of your unsecured debt into a single loan with a single monthly payment. They typically offer a lower interest rate, allowing you to save money in the long run by paying less interest and more principal.

Personal Line of Credit

A personal line of credit is similar to a credit card. A lender will approve you for the full loan amount, but you can use it incrementally and only pay interest on what you use. A personal line of credit is great for emergencies or ongoing expenses.

Experience Relief

Understanding all of the different personal loan options available is critical to reaching your financial goals. Knowing which option works best for your specific situation and financial needs is key knowing how to choose a personal loan. Contact the experts at Liberty Lending Group who can speak to you about your options.

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