Personal Loan Types
VARIABLE RATE LOANS
Variable rate loans are loans that have an interest rate that will fluctuate over time in line with prevailing interest rates. They generally have lower starting interest rates than fixed rate loans, but the interest rate and payment amounts can change over time. Sometimes they are also known as floating rate loans.
If a variable interest rate goes up, this also raises the monthly payments on the loan and the total interest the borrower will pay. However, variable-rate personal loans often have initial rates below what is offered on a fixed-rate loan.
FIXED RATE LOANS
Fixed rate loans are loans that have an interest rate that does not change over the life of a loan, which means you pay the same amount each month. It also means you know with certainty the total interest that you’ll pay over the life of the loan. Fixed rate is a general term that can apply to different types of loans with a variety of uses, including student loans, mortgages, auto loans, and unsecured personal loans.
If you want steady payments that don’t change, a fixed-rate personal loan is the way to go. This option can also protect borrowers against interest fluctuations. This can be especially beneficial for longer repayment periods.
Simply stated, an installment loan is a cash loan that requires a fixed number of regular payments that are equal in amount. Payments on an installment loan are calculated over a set duration. For example a home mortgage is a type of installment loan; even tough a credit card may require a monthly minimum payment, it is not an installment loan.
Installment loan payments are scheduled in advance, so they’re more manageable. Also, the cost of the loan is spread over multiple payments, so they’re more affordable, too.
SINGLE PAYMENT LOANS
In general, a single payment loan is a shorter term loan that’s intended to be paid back in one lump sum on a date agreed upon by you and your creditor. The loan and your payment are typically not reported to the credit bureaus.
When the loan size you require is relatively small, you may pay less interest if you opt for a single payment. Single payment loans allow the borrower to take on most of the risk. This will make them less expensive, but defaulting can be catastrophic.
LONG TERM LOANS
Long-term loans are typically tailored to your financial needs, letting you borrow what you need with enough time to repay. These loans come with mandatory monthly payments that must be made to keep your loan in good standing, although the amount of your monthly payment can vary.
While long-term loans can help you get cash for any reason, they can also help you build credit. If you make on-time payments and keep your loan in good standing, a long-term loan can help beef up your credit history and boost your score over time.
A payday loan, sometimes called a cash advance, has a repayment term of less than a month — typically 14 days. Whether you need emergency cash to cover unexpected expenses or just need a little extra cash to make it until pay day, payday loans can help!
Payday loans are available to borrowers with little credit, no credit and bad credit. Payday loans are usually granted quickly and without a ton of documentation required. You can expect to provide proof of identity and income. Some lenders require a checking account. If you’re facing a financial emergency and need money fast and for a very short time, a payday loan is a convenient but costly option.