Having access to cash in times of emergencies or when you need to make a major purchase is something many people worry about. We are living in an era where income isn't growing at the same rate as the cost of living.
Knowing the types of consumer loans available before you need one can help you prepare for unexpected purchases.
There are different types of consumer loans for different situations. Needing cash for the electric bill when your payday is a week away differs from having to buy a new washer and driver.
Short-term loans come in handy for emergency situations while long-term loans are for more costly expenses.
Keep reading to learn about five personal loans everyone should know about.
1. Payday Loans
Payday loans are short-term personal loans that do not require a credit check. These types of loans come in handy when you need cash quick. The average loan amount is $500 in most states but can have higher maximums.
The downside to payday loans is they must be repaid on your next payday. You'll need to have verifiable employment and an active bank account. You can get a payday loan simply by completing the lender application.
2. Online Loans
With changes in the banking industry, online loans have become more prevalent. These are loans that consumers can apply for from the comfort of their homes. The lenders are not restrained by traditional banking regulations so they can assess the loans on an individual basis.
To qualify for this type of personal loan, you'll need to have your tax records, pay stubs, and other proofs of income.
3. Collateral Loans
Collateral loans require the borrower to secure the loan with personal property. Mortgages and car loans are types of collateral loans.
If the borrower fails to repay the loan, the lender can repossess the property and sell it to satisfy the outstanding balance.
4. Line of Credit
Line of Credit loans are types of bank loans that qualify borrowers for the maximum amount based on the creditworthiness. They're one of the best personal loans for good credit because although you are qualified for a set amount, you can withdraw only what you need.
The repayment terms are based on the amount you actually take and not the total amount of the loan. It also gives the borrower access to additional cash when it's needed.
5. Credit Cards Are Also a Type of Consumer Loan
When it comes to different types of loans, some people never consider credit cards. Most credit card companies allow cardholders to do cash advances up to the available balance on the card.
Before doing a withdrawal review the cash advance terms.
Do You Need a Personal Loan?
Whether you need a loan now or later, having access to these types of consumer loans will help you in your time of need. The best part, applying for them is quick and easy.
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