There are two broad categories of loans: secured and unsecured. Secured loans are attached to collateral that the borrower must relinquish if he or she defaults. Examples include vehicle financing, auto title loans and pawnshop loans. Examples of unsecured loans include credit card balances not paid in full each month, personal loans from banks, payday loans, and online installment lending products from companies like Blue Trust Loans.
Installment loans are some of the easiest to obtain, since the lenders generally do not require a high credit score. People who need to borrow money and have credit problems may choose this option, although the interest rates are higher than the norm.
Several other options also are open to consumers with credit issues, but they have drawbacks. Taking out an auto title loan or pawning an item to borrow money poses the risk of losing the possession if the borrower cannot make payments. This may not be too troubling if the item is a computer tablet, but it can be a serious problem if it’s the person’s car or diamond engagement ring.
Payday loans require the customer to repay the entire amount due relatively quickly, usually within two weeks. Often, borrowers wind up refinancing the loan to extend it another two weeks, or they pay it off and immediately start a new loan. They simply cannot come up with the money needed to end the cycle. Installment loans help borrowers avoid this by offering more affordable payments scheduled over several months.
These personal loans can be used for any purpose and the lender is unlikely to ask why the person is applying. Financial advisors recommend using this kind of lending product for essential purposes only since the interest rates are not low.
Many online lending companies can be found, but not all of them are legitimate, and some have terms that should be warning signs. For example, a prospective borrower should not have to pay an upfront fee before receiving any money. Normally, the amount approved is deposited into the customer’s bank account by the next business day. It is not sent by wire transfer or by a mailed check.