If you need some money to pay down your credit cards or to ensure that your expenses are paid while you attend college, then a personal loan may be a good option for you, and there are a few different types of these loans that you can look at. If the common unsecured loan has an interest rate that is too high, then keep reading to learn about a few other types to look into.
Secured Personal Loan
Secured personal loans are a good option if you have assets that you can use to secure the loan. In other words, you will need some sort of collateral when applying and securing the money. One of the most common assets that can be utilized for a typical bank loan is a specific financial holding. This may be a CD, a mutual fund, a 401k, or even a savings account. This type of collateral is a tangible and valuable asset that can be sold if you forfeit on the loan.
The bad news is that you place yourself at risk of having your money or investments seized if you fall behind on payments. Unlike a physical object like a house a car, the money will often be taken directly for repayment instead of auctioning off the goods.
Some businesses will offer secured loans called car title or payday loans. You should know that these are not the same thing as a secured loan offered by your bank. While you can get the loans quickly, the interest rates are extremely high.
Loans With Variable Interest Rates
If the interest on a flat rate interest loan is too high, then you can ask your bank about variable rate options. While the interest rate does fluctuate throughout the life of the loan, it often will do so intermittently and sometimes with more gradual increases, and the rate will not go up just because the loan company wants it to. The rate is linked to a reference interest value that is set by the government in most cases.
While you may find that you are paying out more than you originally would have if you acquired a traditional loan, the fixed rate option is a good choice if you think you can pay the loan back in a short period of time.
Keep in mind that some types of variable interest loans may involve certain fees that you need to pay, so make sure that you ask about this before accepting the loan terms.