Comparing Different Types Of Personal Loans: What To Consider Before You Apply

While personal loans are a convenient way to help pay for almost any personal necessity, they are not without cost. On the other hand, finding a great personal loan can mean the difference between hundreds and thousands of dollars in interest.

Use this personal loan finder to examine your options and discover a loan that meets your needs.

Personal loan types

Personal loans are separated into two main types: secured and unsecured.

Secured Loans

Secured personal loans require collateral, a valuable item the lender can take back if you don’t repay the loan. Lenders usually have less strict requirements for who can qualify and tend to offer lower rates because the collateral reduces the financial risk that potential borrowers pose.

Most of the time, you can get a secured personal loan from a bank or credit union. But only a few online lenders may provide them.

Unsecured Personal Loans 

Unsecured personal loans don’t require you to put up collateral or anything of your own as security. But this means lenders usually have higher rates and have stricter requirements for who can get a loan.

Banks, credit unions, and online lenders all typically offer unsecured loans.

Comparison of Personal Loans

When comparing personal loans, keep these things in mind:

  • How you can use a loan

Most of the time, you can use a personal loan for any individual or legal expense, but some lenders have rules. For example, you usually can’t use a personal loan to start a business or go to college.

  • Qualification requirements

 Lenders look at your credit score, income, the ratio of your debts to your income (DTI), and overall credit history to decide if you are eligible. Before applying, ensure you know the lender’s minimum requirements to have an idea of if you’ll be accepted.

  • Amounts of loans

Lenders offer different loan amounts. When comparing lenders, ensure your top choice can give you the loan amount you need.

  • How to repay

The length of the loan varies from lender to lender. You can pay off your debt faster and save on interest if you have a shorter term. If you have an extended loan term, your monthly payments will be lower, but you’ll pay more in interest over time.

  • Rates 

The total cost of your loan is based on the rate you get. Most of the time, people with the best credit scores get the best rates on personal loans. Some lenders have a prequalification process that doesn’t affect your credit score but lets you see what rates and terms you qualify for.

  • Loan fees

Check if your preferred lender has other fees aside from rates, such as origination fees, administrative fees, or prepayment penalties.

  • It’s time to pay

Some lenders offer fast personal loans that can be paid out as soon as the same day, while others may take up to a few business days. When you apply for a loan, think about how soon you need the money.

  • Choices for customer service

Check out the lender’s customer service options and read past and present borrowers’ reviews to ensure it’s a good fit.

How to Get a Loan for Yourself

Even though you can get personal loans from places like banks and credit unions, you can also get them from online lenders. Loan amounts and terms vary depending on the lender. Credit Unions like HFCU have more straightforward requirements than traditional banks, and they can give you money in as little as 24 to 48 hours.

Your credit score, income, and the amount you want to borrow can help you choose the best lender for you.

Whether you are looking for an unsecured or secured personal loan, Heritage Financial Credit Union is the name you can rely on. It helps you get the best personal loan according to your needs.