A personal loan is an affordable and easy way to get cash to meet your immediate needs.
Whether it may be a family vacation,education expenses or getting catch up on pending bills.
Let’s take a look of some of the benefits of a personal loan.
Benefits of Personal Loans
1) Fixed interest rate:
With a personal loan you interest rate does not change for the duration of the loan term. So your monthly installments never change.
2) Fixed term:
Because your loan term is set, you know how much payments you need to make to completely pay off your loan.
3) Long Payment Period:
You are able to pay your loan in monthly installments of up to 72 months. This makes the monthly payments manageable, payday loans being an exception.
4) Principal Payments:
The monthly principal payments ensure that your loan decreases over time.
All you have to do is ensure that you make your loan payments on time.
Types of Personal Loans
You can choose from many types of personal loans to find the best loan for your needs. Individual needs and circumstances can affect your choice of a personal loan.
Unsecured Personal Loans:
These loans don’t need collateral such as your home, car or other personal property. If you default on an unsecured loan, the lender has no legal recourse for non-payments. These loans have higher interest rates
Secure Personal Loans
A secured loan requires collateral that “secures” the loan. Examples of secured loans include home mortgages, home equity loans and vehicle loans. Whilst secure loans have lower interest rate, if you default on the loan the lender has the right to repossess because of none payment.
Fixed rate personal loans
The interest rate charged for these loans remains the same throughout the loan term. Installment loans typically carry fixed rates while lines of credit usually have variable rates.
Variable rate loans
Interest rates vary and change according to a schedule included in loan terms. Variable rate loans may also carry “caps” that limit how much rates can change at each adjustment period or over the life of a variable rate loan.
This type of loan is made for a specific amount and is repaid in equal periodic installments over an established repayment term. Installment loans can be secured or unsecured. Installment loans usually offer fixed interest rates and are a good choice for a one-time expense.
Lines of credit
A line of credit allows you to use credit as needed up to the maximum credit line. For example, if you have a Ksh.200,000 personal line of credit, you can use Ksh.100,000 for debt consolidation and pay interest only on the amount you use. Line of credit options include secured and unsecured options.
Credit cards, cash advances(Payday loans) and balance transfers
Credit card accounts are types of personal loans repaid on a revolving basis. Your payments are determined by your credit card balance and interest rate, which can be fixed or variable.
In addition to using your credit card to pay for expenses, you may also be able to take cash advances against your available credit, but be careful. Cash advances may incur higher interest rates and require payment of a cash advance fee assessed as a percentage of the amount advanced.