Borrowers have a variety of options when it comes to funding.
And there are a number of loans that compete with personal loans.
More often than not, borrowers with the best credit scores earn the most favorable rates.
Because there’s such a wealth of personal loan lenders, you could earn a lower interest rate than you would shopping around for a traditional auto loan or business loan.
Personal loans tend to come in two types: secured and unsecured.
Secured loans are backed by a piece of the borrower’s property as collateral, typically a vehicle or house.
Some of the most common uses of a personal loan are: debt consolidation, home renovation, funding marriages, funding vacations, or many other big purchases.
Personal loans can also be used as an alternative to auto loans or student loans (though only if the personal loan offers more favorable terms).
A loan’s interest rate determines what percentage of the loan’s amount borrowers will pay from month to month in interest.
Many other loans come with fixed interest rates, including auto loans, and student loans.
Variable interest loans (also known as adjustable interest or floating rate loans) change from payment to payment.
Because the lender takes on more of a risk with an unsecured loan, interest rates tend to be higher.
Lenders also require that borrowers seeking an unsecured loan have a higher-than-average credit score.