If a person is thinking about finding a loan, they may come across personal loans. Personal loans are one of the most common types of lending out there.
If someone is thinking about personal loans, they may be wondering how personal loans compare to other types of loans, as it may help them narrow down their funding decision. Here is more information on personal loans, along with details on other common forms of lending, and how they compare to personal loans.
What to Look at When Comparing Any Kind of Loan
Here are some loan attributes that should be looked at carefully before deciding to obtain any type of loan. Make comparisons to figure out what loan works best for you:
When thinking about obtaining a loan, it is important to think about eligibility requirements for the loan. Some factors that will be considered for eligibility are credit score/credit history, income, and the ability to repay the loan.
How Quickly Funding Can Be Made Available
When looking for funding, some people may need it urgently, while others may have time to wait. Some loans work faster than others, so the process length is another factor to compare if time is important.
The Average Interest Rates
The lending industry has all kinds of loans and lenders, and interest rates will vary. This a huge factor to consider with a loan, as it is essentially the cost of the loan.
Average Loan Term
The term or length of the loan is another important factor to consider when looking at what loan to take out. Having a longer loan may mean paying more interest, but it also gives a borrower more time to pay back the loan.
How Funding Can Be Used
How funding can be used is an important factor to consider, as some loans are more flexible than others when it comes to spending the loan money.
How Many Lenders Are Available?
When it comes to the more uncommon types of loans, it may be a little difficult to find groups of lenders to work with—without the help of a loan financial referral service.
How Personal Loans Do in These Categories
Here is a quick overview of how personal loans work, and how they do in the categories listed above.
The unique thing about personal loans is that they can be made available to people with a variety of credit scores because they can be either a secured loan (a loan requiring an asset) or an unsecured loan (a loan not requiring an asset). This grants a lot of flexibility in terms of eligibility.
Availability of Funding
Funding from a personal can take anywhere from a few days to a week.
The average rates for personal loans range between 5% to 36% of the loan’s principal amount.
Personal loans typically range from one to five years.
Use of Funding
Funding from personal loans can be used for almost anything.
Personal loans are one of the most common types of loans out there, and so there are tons of lenders available to give out these loans.
What Other Loans Can Be Compared to Personal Loans?
Here are some of the common types of lending out there:
- Auto Title Loans
- Student Loans
- Payday Loans
Here is a comparison of these loans in the terms listed above (excluding loan terms because they can vary as a positive or negative for many people). Here are the positive, negative, and neutral aspects of the other types of lending when compared to personal lending:
Auto Loans vs Personal Loans
- Positive- Auto loans do better with eligibility and how soon funding is made available, as auto loan funding can be made available the same day.
- Negative- The interest rates on auto loans can be very high, and lenders may be hard to find.
- Neutral- Auto loan funding can also be used for anything.
Student Loans vs Personal Loans
- Positive – Student loans can be made available to those with no credit history, a large amount can be given out, and there are several lenders available.
- Negative- Funding from student loans can only be used for school related expenses, and funding can take a few weeks to a month.
- Neutral- Interest rates are similar to personal loans.
Payday vs Personal Loans
- Positive- Payday loans are easily available and designed to provide quick lending.
- Negative– The amount is usually no more than a thousand dollars.
- Neutral- Interest rates for payday loans are average.
When thinking about a personal loan, it may be helpful to compare other common loan types to figure out what loan will work best. When it comes to comparing loans, it is important to look at several different factors. Personal loans are great for those who can wait a couple days for funding, want average interest rates, and want to be able to look at several lenders.