With a personal loan, you borrow a fixed amount of money and agree to pay it back over a period of time. You must pay back the full amount, interest and any applicable fees. You do this by making regular payments, called instalments. Personal loans are also called long-term financing plans, instalment loans and consumer loans. Personal loans are typically used for specific purchases such as home renovations, furniture and cars or to consolidate other debts with higher interest rates. Most personal loans range from $100 to $50,000 with a term between 6 and 60 months.
Personal loans are available from traditional lenders, such as banks and credit unions, as well as alternative lenders such as payday lenders, title loan companies, private lenders and pawn shops. Your lender may offer you a loan for more than what you need. Be careful not to borrow more than you can pay back.
A secured personal loan uses an asset, such as your car, as a promise to your lender that you will pay back the loan. This asset is called collateral. If you can't make your payments, the lender can take the asset from you
There are various kinds of secured loans including: secured personal loans, title loans, pawn loans
An unsecured personal loan is a loan that doesn’t require collateral. If you don’t make your payments, the lender may sue you. They also have other options, such as the right of offset.
Many alternative lenders offer unsecured personal loans. These can be referred to as instalment loans or high-cost instalment loans. The interest rate on these loans is typically much higher than the unsecured personal loans offered by banks and credit unions.
The interest rate on a personal loan will impact the overall cost of the loan. By law, lenders may not charge more than 60% interest annually, which includes all fees, costs and interest that you’ll pay to get the loan.
Which type of personal loan term is right for you?
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