Types of Personal Loan and Which One to go for?

People say money doesn’t buy happiness but it pays the bills and that keeps you happy. Now, it is stressful when you cannot keep up with your financial obligations, so a loan shark may sound reasonable. However, they offer absurd interest rates and upon deferment, many fall prey to acts of violence from these unlicensed moneylenders. 

It is better to avoid unnecessary risk by dealing with licensed moneylenders who offer personal loans. Personal loans come in four types distinguished by their different terms. Read on to find out how each one works.

Line of credit 

Line of credit loans, also commonly known as a credit line or flexible repayment loans, offer a quick access credit facility. It allows you to draw a predetermined amount stipulated to you. This fixed borrowing amount is set on your account and can be withdrawn whenever the need arises. The pre-set amount is a maximum and you can choose to withdraw less at a time until you reach the limit. Line of credit loans do not have a fixed repayment period, you ‘pay as you go’ thus the name flexible repayment loans.

Credit lines are perfect for solving an urgent crisis, as they are fast and easy to apply. When granted, withdrawing the amount requires no further hustle. This type of personal loan attaches no collateral to it and so, higher interest rates accrue to them. This means you do not need to worry about losing your assets even if you fail to repay your debt. However, deferring repayment will affect your credit score. 


Personal term loan 

A personal term loan allows you to borrow money in order to meet demanding personal expenses then later repay the amount over time. This personal loan type gives you access to a fixed borrowing amount at a fixed interest rate. Unlike the latter that operate in a way very similar to a credit card, personal term loans are lump-sum amounts.

These loans do not have a fixed repayment period rather, they allow you to set your own. With a personal term loan, you can choose the repayment period that best suits you from a range of 1 – 7 years. The repayment period you decide solely depends on the amount of loan you need and its interest. 


Debt consolidation loan

When drowning in debt, this personal loan is set to save you from a crisis. It is perfect for an individual who owes multiple debts that amount to at least twelve times your salary. A debt consolidation loan repays all your existing debtors, leaving you with a single debt to repay. So speaking, it combines your numerous debts into one consolidated debt. 

By taking a debt consolidation loan, you fill several smaller pits by digging one huge pit that is easier to manage. You save yourself from the tedious task of multiple payments at different dates as well as the stress from different interest rates. 


Balance transfer loan

As suggested by the term ‘balance transfer’ this loan simply transfers your credit from your credit card to a loan balance. It does so by paying the balance on your credit card, freeing you from any further interests associated with its continued existence.

The new credit balance on a balance transfer loan attracts an incredible interest rate of 0% for the first 6 – 12 months. Yet, it does attract a processing fee, paid upon the loan approval. This choice perfects if you are looking to cover your credit card debt immediately but are certain to repay within the interest-free period. This is because after this period is up, interest rates will charge on your loan balance.


Which one to go for?

A line of credit loans seems to stick on top of the chart. Like no other, credit loans are readily available loans applied for in advance. As opposed to a lump sum, you can access just how much you need while averting the risk of losing assets.

It allows you to repay at a time most convenient to you. However, there are different factors, like purpose, to consider when choosing the type of personal loan that is right for you. Therefore, whenever you need extra cents simply click here and find yourself safe in the hands of a licensed moneylender. 


Category: Business
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