There are times when you need extra money to pay off your existing bills or debts. Lucky are you if you’ve got family or friends who can offer you a small loan. However, if you don’t have someone to go to for some financial help, you can go with personal loans.
How do personal loans work? Unlike credit cards that charge, personal loans don’t have variable interest rates and come with fluctuating payments that vary depending on how much you spend. In addition, personal loans let you borrow a predetermined amount of money with a fixed interest rate and a fixed repayment period.
Some forms of personal loans also come with a fixed monthly payment you can agree to ahead of time, which makes budgeting for your loan a whole lot easier. Depending on your credit-worthiness, it can also come with a low-interest rate.
There are two types of personal loans. The first one is the unsecured loan which doesn’t require any collateral, while the second type is the secured loan which requires collateral in order to borrow. Secured loans may come with lower interest rates since you are securing your loan with an asset such as a car, but not everyone wants to put up collateral in order to borrow money.
There are a number of reasons why people take personal loans. But one of the most popular reasons is for debt consolidation. Imagine you’re a consumer with high-interest credit card debt that’s hurting your monthly budget. A personal loan could help you consolidate that debt at a lower interest rate while securing a predictable monthly payment and a set payoff date that doesn’t change.
Nowadays, there are so many available options for personal loans and this has made shopping for the right one for you more difficult. So in order to help you, here’s a guide you can follow: https://www.moneysmart.gov.au/borrowing-and-credit/other-types-of-credit/personal-loans