Getting a significant chunk of change to help you pay for a large purchase like an overseas getaway, car or a home renovation can be hard to do, often resulting in the consumer having to look to credit.
Personal loans will usually attract lower rates that are much lower, having structured payment requirements that a customer has to stick to. The analysis done by financial comparison websites has gone to show that there are three kinds of personal loans:
Secured Personal Loan
This is where a car, or another asset, can be repossessed if repayments are not met.
Unsecured Personal Loan
These are loans that are common for purchases, but there is no security for the actual loan, so they can attract much higher interest rates.
Line Of Credit
These are much less common, usually for those who have a higher income, and it can be an overdraft on a bank account.
Experts in personal loans say that there are lots of choices for a customer who is looking for a personal loan with competitive rates, so it does pay to go through and do your research first. Personal loans can be a wonderful alternative to putting a large purchase, like a major appliance, on your credit card. Generally, personal loans will offer much lower interest rates than a credit card because you will have to pay back the debt within a certain timeframe. Be aware that setup fees can end up being around $150.
Looking at online loan calculators, the figures show a $10,000 2-year personal loan will have an average interest rate of 12.14% and the monthly payments will be about $471. Credit card cash out rates, by comparison, will be around the 20% mark. Marketplace or peer to peer lenders like Society One are worth exploring when you want an alternative to banks or credit unions, because they can offer sharper deals.
Front Row Financial director Brendan Turnbull noted that there can be some wiggle room with lenders on a loan deal that you strike. You will generally find after you have a loan set up, that if you have a personal loan existing and you want to refinance it somewhere with a lower interest rate, the bank that you are with may go into retention mode.
If the only choice that you have is between a personal loan and a credit card, you would always choose the personal loan. The reason that a bank will offer a cheaper interest rate with personal loans because there ends up being an end date.
About Chris Steadman
Chris is enthusiastic and fascinated by the digital and social media worlds. He is passionate and enjoys entrepreneurial pursuits, wealth creation financial strategies, health, fitness as well as cooking. Chris is the webmaster at fast-check-advance.com, which is an information website pertaining to cash loans. He has a deep commitment towards writing about and helping people understand the basics of how the financial world works.