What You Need To Know About Personal Loans

Personal loans, while not as popular, can be a good alternative to credit cards considering the large interest rates credit cards are saddled with these days.  By personal loans I am not referring to the drive-thru, “you give me your car title; I’ll give you 600 bucks” loan places.  I mean an honest to goodness personal loan.

The payday loan places are not the only people looking to rip you off with ludicrous interest rates so make sure you understand what you are signing before you put the pen to the dotted line.

There are two different types of personal loans, secured and unsecured.  A secured loan is when they loan you money at a low interest rate.  They do not give you the low rate just because they think you’re pretty unfortunately.  They will ask you to put something up for collateral, like your house or car.   If you do not pay off the loan you can lose the commodity you put up for collateral.  

Unsecured loans, also known as signature loans, are when the lender will simply give you a loan and you sign on the dotted line.  Again, unsecured loans generally have a higher interest rate than secured loans.  The tradeoff is that with unsecured loans you do not have to risk losing an asset.  

Now that you are educated the next step is to decide where to go to get a personal loan.  Your first stop should be your bank.  Ideally you have a good relationship with your bank and they will be willing to offer you a personal loan without a high interest rate.  

Get a quote from your bank as to what interest rates you are looking at, then you can shop around and see if any credit unions or other banks can give you a better offer.