Each year, countless individuals take out a personal loan to help better manage their debt or as a loan for home improvement projects. According to TransUnion, the number of individuals who use personal loans has increased to over 27 million in the past few years. It’s one of the fastest growing financial products in the country. Here’s what you should know.
How Personal Loans Work
First, let’s explore how a personal loan works and what it can do for you. A personal loan is a type of online installment loan. You borrow a specific amount of money, then pay it off with interest in monthly payments. The life of the loan is generally 12 to 84 months. It’s important to remember that, each month, you’ll pay interest on the loan amount.
Once the entire loan has been paid off, the account is closed. If you ever need another loan, you’ll need to reapply.
Types of Personal Loans
There are two primary types of personal loans: secured and unsecured.
- Secured Personal Loans – A secured loan is backed by personal collateral. You’ll either put up your savings account or, perhaps, property. If you do not make the monthly payments, the lender is well within their rights to claim your assets as payment.
- Unsecured Personal Loans – An unsecured personal loan is not backed by collateral. The lender must decide whether you’re qualified for their program based on your credit score and financial history. If you are unqualified, you won’t receive a loan. Or, the lender can offer a secured loan option.
Where to Find Personal Loans
These days, it’s easy to find a personal loan company. For most, a quick visit to the bank is enough. Their local bank or credit union typically has a personal loan program. If your bank or credit union does not offer personal loans, they should be able to point you in the right direction. Most often, a credit union will suffice, though.
However, in recent years, online lending companies have begun to sprout up. These personal loan companies such as Wise Loan, MoneyKey etc are often backed by the Consumer Financial Protection Bureau or the Better Business Bureau. You’re safe in choosing an online lender who has such backing.
When you need a personal loan for whatever life may throw your way, consider starting your search online. There are so many fantastic lending companies doing business in the digital world.