What Are The Types of Personal Loans?

Most of the personal loans are unsecured with fixed payments. But there are other types of personal loans including secure and variable-rate loans. The type of loan that works best for you depends upon the factors including your credit score and how much tie you need to repay the loan.

Most of the financial institution provides the following types of personal loans in South Africa.

Types of Personal Loans
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  • Unsecured Personal Loans
  • Secured Personal Loans
  • Fixed-rate Personal Loans
  • Variable-rate loans
  • Debt consolidated Loans

In this article, we will discuss all these types of loans in great detail.

  • Unsecured Loans

This is the common type of loan is backed by collateral such as home, or car that making them riskier and may charge slightly higher annual percentage rates. Approval and rate you receive on an unsecured personal loan are mainly based on your credit score. Rates ranges from 5-36% and repayment terms range from 1-7% in one year.

Secured Personal Loans
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  • Secured Personal Loans

These loans are backed by collateral, which can be seized by the lender if you default on the loan. It includes mortgages and car loans. Some banks credit unions and lender offer secure personal loans where you can borrow against your car, personal savings or any other assets.

  • Fixed-rate Loans

Most of the personal loans carry fixed rates means your rare and monthly payment is fixed for the lofe of the loan. It makes sense if you want consistent payment each month.

  • Variable-rate Loans

The interest rate on variable-rate loans is tied to a benchmark rate i.e set by banks. Depending on how the benchmark rate fluctuates the rate on our loans as well as monthly payment can rise or fall with these loans.

Debt Consolidated
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  • Debt Consolidated Fund

This type of personal loans rolls multiple debts into a single new loan. The should carry a lower APR than the rates on your existing debt to save on interest.

It is important to familiarize yourself with different types of loans along with their repayment options. If any part in the agreement is unclear to you, don’t hesitate to ask for clarification or adjustments. If you are in dire need of taking personal loans then check out here to learn step by step method of getting personal loans.