Personal loans are a means of obtaining money to address various needs and expenses. It will help in handy in different situations, such as dealing with debts, covering medical expenses, making significant purchases, or paying for school fees. Let’s share some insights into various types of personal loans.
Main Categories of Personal Loans
Personal loans can be categorized into two main types: unsecured loans and secured loans. Understanding the differences between these types is important when choosing a personal loan as your financial option. They are,
- Unsecured loans
- Secured Loans
Unsecured Loans
Unsecured loans are the ones where you don’t have to give anything to pledge against your personal loan. It’s like borrowing funds based on how good you are at managing money. These loans might have higher interest rates because of no collateral.
Secured Loans
With secured loans, the borrower pledges to the lender a valuable item, referred to as collateral. By serving as security for the loan, this collateral lowers the lender’s risk. The lender could take the collateral to recover their funds if you are unable to pay back the loan. Because the collateral gives the lender a sense of security, secured loans usually have lower interest rates than unsecured loans.
Types of Unsecured Personal Loans
Debt Consolidation Loans
Debt consolidation loans are like combining several loans into one single loan for the purpose of easy handling. This helps by making payments simpler, and it might even lower the amount of interest you have to pay.
Medical Expense loans
Medical expense loans are for those unexpected bills that your insurance doesn’t cover. These loans are helpful because they make sure you can take care of your health without worrying too much about money.
Home Improvement Loans
If you want to renovate your home but you are not having enough money at present, you can go with this option. Home improvement loans are for fixing up or making your home better.
Major Purchase Loans
Major purchase loans are for buying big things like new gadgets or furniture. The benefit is that you don’t have to pay all the money upfront; instead, you can spread the cost over time.
Wedding Loans
Wedding loans are there to help you pay for your dream wedding without stressing about money. They cover expenses like the venue, catering, and other wedding costs.
Travel Loan
Travel loans are for funding your vacations or trips. These loans let you explore the world without waiting a long time to save up the money.
Education Loan
Personal loans for students are the best among all loans. Education loans help cover the costs of going to school, including tuition, books, and living expenses.
Types of Secured Personal Loans
Auto Loans
Auto loans help you buy a vehicle. The plus side is that you might get a good interest rate and the vehicle you buy acts as a promise that you will pay back the loan.
Home Equity Loans
Home equity loans let you use the value of your home for a large loan. This type usually comes with lower interest rates and might even have some tax benefits.
Pawnshop Loans
Pawnshop loans are for borrowing money by leaving something valuable as a promise. The good part is that you can get quick cash without worrying about your credit history.
Life Insurance Loans
Life insurance loans allow you to borrow against the cash value of your life insurance policy. They offer flexible repayment terms and might have lower interest rates.
Pension Loan
Pension loans use your pension fund as a promise for a loan. This helps you access some extra money while still keeping a source of income for your retirement.
Pros and Cons of personal loans
If you want to study abroad or pursue higher education that interests you, personal loans can be a big help. You can pay them back once you have a job.
These loans are easy to get, and you can quickly access the money you need. The good thing is that you can borrow money with fixed interest rates, so you know how much you can pay.
But, just like the good stuff, there are some cons here. If you don’t have anything valuable to promise and choose unsecured loans, the interest rates might be higher. And, if you miss payments, it can make your credit history worse.
If you go for secured personal loans and can’t repay, there is a risk of losing whatever you promised as collateral. So, it’s essential to think carefully before getting a loan and make sure you understand everything about it.
The best kind of personal loan depends on each person’s unique financial situation, preferences, and goals. Making smart financial decisions requires knowing your options, whether you choose an unsecured loan for flexibility or a secured loan for lower interest rates.
Before taking out a personal loan, it is important to make sure that the conditions, interest rates, and repayment schedules offered by the lender are in line with one’s financial goals.
FAQs
Yes, you can get a personal loan if you are a salaried person with a monthly income of a minimum of Rs. 15,000. If you prove to your lender that you can manage your finances and will be able to pay your EMIs on time, you can definitely get a personal loan with a Rs. 15,000 salary.
Most lenders will provide different interest rates for your personal loan amount. It is best to calculate your EMI before you choose your loan tenure. You can use an EMI calculator to estimate the EMI amount and choose the tenure of your personal loan accordingly.
The different types of personal loans allow you to borrow and use your loan amount for different purposes. They can be for marriage, travel, education, etc. Can I get a personal loan with a Rs. 15,000 salary?
How can I calculate my EMI?
What are the uses of different types of personal loans?
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