Five Types of Personal Loans to Consider when You Need to Borrow Money
There are many reasons that you may need to borrow money. If your car has broken down and you don’t have the funds to pay for it, you may need a small loan to help get your car back on the road. However, if the problem with your car is too severe, you may want to take out a loan to buy another car to replace yours. If you need to borrow money, you should be aware of what type of loans are available to you.
Five Types of Personal Loans
There several types of personal loans that you can take out at a bank or with a private lender. Here are some of the ways you can borrow money when you need it.
Pay Day Loans
This type of loan is good for taking out small amounts of cash for a short period of time, usually for two weeks or so. When you go to a business that offers payday loans, you can apply for the loan and, as long as you can show proof of a bank account, being employed and agree to pay the loan back on your next payday, they will lend you the money you need.
A payday loan is good for when you need cash in an emergency. If your car breaks down or if you don’t have enough money to cover a bill, you can borrow the cash you need and pay it back with your next pay cheque. This type of loan is only available from certain lenders and is not issued by banks or other such institutions.
Some lenders offer logbook loans to people who need money to cover an emergency. If you own a vehicle, usually a car or van, you can use it as collateral to take out a loan. The vehicle stays in your possession as long as you are making the necessary repayments on the loan. However, if you don’t pay back the money as promised, the lender can take possession of your vehicle.
Most lenders will allow a vehicle’s owner to borrow up to fifty percent of the vehicle’s value. For instance, if your car is worth £3,000, then you could borrow up to £1,500. Along with cars and vans, some lenders will also do logbook loans on motorbikes.
A short-term loan is a type of instalment loan that allows you to make repayments on the money you’ve borrowed for a few months. Instead of taking a small loan out that you can repay with your next pay cheque, you can take more money out and repay it over a few months. Some lenders will allow the borrower to repay this loan over a period as little as three months or the borrower may be able to take up to six months to repay it.
With this type of loan, your credit history will be scrutinised to determine if you are able to be approved for it. However, by going to a private lender, you will not need to have superior credit like you would if you went to a bank to borrow money. Even if your credit has some issues, you may still be able to take out a short-term loan.
Traditional Instalment Loans
When you need to borrow a large amount of money, this type of loan will allow you to make repayments on the loan for several years. Traditional instalment loans are often used to start a business, buy a house or purchase a new car. While these loans are offered by banks, unless you have a superior credit history, you may have trouble being approved by a bank.
Private lenders may also offer traditional instalment loans although payday and short-term loans are the main loan products they offer. However, people with less than perfect credit may wish to seek out a private lender to find out about getting a traditional instalment loan so they can purchase the car they need or to try to get a home loan.
This is another type of instalment loan in which you would make scheduled repayments. However, the difference in this instalment loan is that you need a friend or family member to vouch for you and help you get the loan by signing for it with you. If you defaulted on the loan, then the lender can go to your guarantor to recover their money.
A guarantor loan is a good option if you have someone willing to sign for a loan with you. Instead of having to pay very high-interest rates on a loan that you took out on your own, you can get a lower interest rate on a guarantor loan. Many private lenders offer guarantor loans to their customers.
Which Loan Is Best for You?
Before you put your signature on a loan application, you need to decide which type of loan best suits your needs. To help you determine which type to apply for, you will need to figure out why you need the loan, how much you need to borrow and how much you can repay each month. Of course, if you are in the midst of an emergency and it is between pay periods then you may need to go to a private lender for one of their payday loans. If you need to borrow more money than you can repay with your next pay cheque, then you will need to consider one of the other four loan types.
Going to a private lending company can be a good way for your borrow the money you need for an emergency or to buy a vehicle, even if you do have problems with your credit history. While you will probably pay higher interest rates than you would with a traditional bank, you can borrow the cash you need to take care of a home repair, a vehicle repair or you can borrow the money you need to take your family on vacation.