Every day, people across the U.S. take out loans for various reasons. Perhaps to fund a home improvement. Maybe to pay for some unexpected car repairs. And in some cases, to pay for that dream vacation.

In all of these scenarios, personal loans are a lucrative option for people who need to pay for something but don’t necessarily have the cash sitting at the ready. That said, not all personal loans are the same. It’s important that borrowers know the types of personal loans available to them and the expectations to fulfill their end of the agreement. In this article, we’ll give you the details you need to know about personal loans.

What is a Personal Loan?

Simply stated, a personal loan is a financial agreement that borrowers make with lenders. The selected lender agrees to lend money to the borrower in exchange for timely payments and a full pay-off by the end of the loan term.

For example, perhaps you take out a loan for $10,000 for some necessary home repairs that you can no longer put off. You agree to pay off that loan over a ten-year period. To do so, you’ll be expected to make monthly payments, inclusive of interest, until the amount you borrowed plus the associated interest has been paid in full.

Here are the key characteristics of a personal loan that you should be aware of.

• Fixed or Variable Interest Rates: Some personal loans come with a fixed interest rate, meaning the rate stays the same throughout the entire loan period. Others may have a variable rate, where the interest may fluctuate based on market conditions, potentially changing your monthly payment.
• Fixed Repayment Schedule: Personal loans usually follow a set repayment schedule, meaning you will make regular monthly payments over a specified period. This could range from 12 months to 60 months, depending on the loan agreement. Your payment amount will be consistent if you have a fixed interest rate, making it easier to plan.

To understand personal loans fully, you should also recognize the difference between secured and unsecured loans. Secured loans require collateral, such as a car or home, to back the loan. In contrast, unsecured loans rely solely on your credit history and financial reliability to determine approval, meaning no physical asset is used to secure the loan. We’ll talk about these two types of loans a bit more later in this article.

What Do I Use a Personal Loan For?

You can use personal loans for a variety of different purposes, some of which we mentioned earlier in this article. Here are the most common uses of a personal loan and why you might need one.

• Debt Consolidation: Personal loans can help combine multiple high-interest debts into a single payment with a potentially lower interest rate.
• Home Improvement: Personal loans provide an option to fund home repairs or upgrades without dipping into savings.
• Large Purchases: Whether it’s a major appliance, a wedding, a dream vacation, or the costs associated with moving, personal loans can cover these significant expenses.
• Emergency Expenses: Personal loans offer a quick financial solution in urgent situations like unexpected medical bills or car repairs.
• Educational Costs: Personal loans can also cover education-related expenses outside of traditional student loans, such as tuition or supplies.

What are the Different Types of Personal Loans?

Just as personal loans are used for various needs, the loans themselves can come in all shapes and sizes. Depending on the health of your credit score and your current debt-to-income ratio, you may be more likely to be approved for some types of loans than others.

Here are the different types of personal loans that you may wish to consider for your financial needs.

• Secured Personal Loans: These loans ask for collateral, typically your car or savings account, to back the loan. If you default, the lender can claim the asset.
• Unsecured Personal Loans: These are granted based on your credit score and income without needing any collateral. Approval depends largely on your creditworthiness.
• Fixed-Rate vs. Variable-Rate Loans: Fixed-rate loans offer stable monthly payments, while variable-rate loans may have lower initial rates that can change with the market, potentially lowering or raising your payments.
• Debt Consolidation Loans: These loans are specifically designed to combine multiple debts into one, helping you manage payments with a single loan and possibly a lower interest rate.

Cash Store Offers Installment Loans

At Cash Store, we’re happy to offer installment loans for those looking for an easy way to secure funds for their expenses. Are you in need of fast funds to cover an emergency? Do you have a looming large purchase that can’t be delayed and you don’t have the funds on hand to pay for it? Cash Store might be right for you if you answered yes to either of these two questions.

To get started, complete our prequalification application today.