Some Things To Know About Personal Loans

Borrowers are able to apply for a loan over the phone or online from a certain loan officer or an agent. It’s no secret that lenders base the interest rates on how much was borrowed, the length of payment period, and the financial status of the borrower. There are actually two types of personal loans based on terms, the long-term and short-term. They differ from each other because of the repayment period.

People that have good credit records usually are more likely to be approved for long-term personal loans. The interest rates of this type of loans are higher than the other one, thought. Collateral or any certain types of security are usually required so the creditor has the right to repossess the property of the borrower in the event he/she does not pay.

But it’s not the case with all long-term personal loans. There are two subtypes, secured and unsecured. With the secured type, any asset should be given as collateral to the lender before getting approved for the loan. The borrower can repay for a long period of time, say 5 to 25 years, and because of this, the monthly payment can be cut down. After repaying the total loan amount, the borrower can then get the asset back from the lender.

Unsecured long-term personal loans do not require any assets whatsoever. It helps individuals to enhance their credit by paying on time and in full amounts. Since this is considered as a high-risk loan, expect that interest rates will also be high.

There are two types of interest rate in long-term personal loans, fixed rate and variable rate. With fixed rates, it simply means that the interest rates never change all throughout the life of the loan and so is the payment, while with variable interest rates, the payments change constantly depending on the current interest rates. The variable type is the riskier one then since it depends on the market situations.

There are two types of interest rates in long-term personal loan, and those are fixed and variable rates. Fixed rates are interest rates that never changed throughout the life of the loan. The variable interest rate has a fluctuating payment that goes with the current interest rates. Variable interest rates have more risk than the fixed rate as variable rates changes according to the market situations.

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