When You Have Unexpected Expenses
Trying to find the loan that is best for your situation can be difficult due to a number of factors. Not knowing your credit score, negative items deep in your credit history that need to be addressed and the varying guidelines required by lenders, can all individually or in combination make finding a loan seem impossible. When you add in the different kinds of personal loans available, some people give up on finding a loan before they even really start. The process may seem confusing at first, but with a little knowledge and some help, it can be quick and simple.
What Personal Loan Solutions Are Available?
There are several loan types in the market available for personal use: unsecured personal loans, peer-to-peer loans, secured personal loans, and short-term loans.
Unsecured Personal Loans
Unsecured personal loans are a type of loan that doesn't require you to use any collateral. There's no risk on your part as you're not using personal property to guarantee to the lender that you will pay back the loan money. With an unsecured loan, you're essentially promising the lender that you will make the payments.
It's sometimes referred to as a signature loan or no collateral loan, as your word (your signature) is what you're giving to the lender instead of collateral. Since there isn't any collateral tied to the loan, the interest rates are generally a little higher, but that rate is typically fixed, meaning it won't change for the entire term of the loan, and you aren't risking any hard-earned assets.
Peer-to-peer loans — also referred to as person-to-person loans or P2P loans — are exactly what they sound like: people lending money to other people. The process starts when you making a listing for your loan request on a peer-to-peer lending platform. Individuals or institutional investors review your request to decide if they want to fund all or part of the loan you need. If enough people choose to fund your loan request, the funds are distributed by a financial institution and you make payments to the peer-to-peer site that, in turn, distributes those payments back to the investors.
The benefit of this form of personal loan is that your personal story can play a much larger role in your ability to be funded. Also, your interest rates are typically half of that you'd find with your credit card and the fixed term (generally three to five years) means that you can pay off your debts in a shorter length of time. While you aren't dealing directly with a bank, the process is still regulated and overseen by the government. The Securities and Exchange Commission (SEC) grants licenses and registration to peer-to-peer lenders.
Secured Personal Loans
Secured personal loans usually come in the form of home equity lines, car loans, title loans, or mortgage loans. People with poor or bad credit usually think about these types of loans since they can be easier for them to get from a lender.
Why are secured loans easier to obtain? Secured loans use your property, such as your home or your automobile, to guarantee payment. If you're unable to make payments on the loan, the lender could foreclose on your house or repossess and sell your car to get that money back. This can present a big risk to you and your family if you're unable to keep up with the payments.
Short-term loans may be more familiar to you under their more publicized name: payday loans. These high interest rate loans can usually be obtained two ways:
- You write a personal check to a storefront payday lender for money you want to borrow, including the lender's fee for giving you that loan. The lender then holds onto your check until the loan and fees are due, which is typically your next payday.
- You access a payday loan site online and provide your personal and bank account information. They deposit funds directly into your account as quickly as same day in certain cases. On your next payday, they withdraw the loan amount plus interest and fees directly from your account.
The fees generally are a finance charge and an annual percentage rate. Due to repayment being tied to your next paycheck and to the extremely high interest rates and finance charges, you should only consider taking out a short-term loan in the event of an emergency and only if you know you will be able to repay the funds. You don't want to end up in a cycle of continually borrowing again to pay off the loan that comes due.
Finding the Right Personal Loan Solution for You
The first step in finding the right personal loan solution is finding a company that has the experience and expertise to help ensure that you're matched with the highest-rated solution available, regardless of your current financial situation. For the last 14 years, AmOne has worked with lenders across the United States. We've collected reviews from our clients to help determine which of our partners offer the best loan solutions and the simplest processes.
We provide, at no cost
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from trained professionals — our financial search specialists — who are available to answer all your questions via phone. To find the right personal loan solution for you, enter your information in our simple personal loan form
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Learn more about why these loans are lower risk for a consumer.
See how loans can be made without having to go through a financial institution.
A secured or conventional loan is usually riskier to have, but comes with a lower interest rate.
Learn why these types of loans should only be used in the event of an emergency.