Personal loans are usually taken out for a large number of reasons but the most common reason of taking out such loans is to seek debt relief and get rid of high interest debts. The US debt relief industry is a strong one and the debtors can take out personal loans, resort to debt consolidation programs or even take resort to balance transfers for getting out of the debt mire. If you’re someone who has accumulated a large amount of debt on your credit cards, you can easily take resort to the loans that are lent by the financial institutions. Have a look at the various kinds of personal loans that you can take out in order to pay off debt.
- Secured personal loans: As the name suggests, it is backed by collateral which is usually your home in case of a home loan or your car in case of an auto loan. Your financial asset is always at stake if you take out a secured loan and thus you have to make timely monthly payments so as to save your home from a foreclosure. Secured loans must only be taken out when you’re sure about your net worth, your income and your repayment ability.
- Unsecured personal loans: An unsecured personal loan is not secured by anyone and therefore you need not pledge any collateral for taking out such a loan. Such a loan is usually taken out on the basis of your general creditworthiness and thus you’ll be charged high interest rates, as compared to that of the secured loans. If not repaid, the lender may sue you under certain circumstances.
- Home equity personal loan: A home equity loan is a best option for someone who has accumulated enough equity on his home and wants to tap it in order to pay back his unsecured debts. The home equity loan will have low interest rates, a long repayment term and interest rates that are tax-deductible. You can take out a loan whose amount will be equal to the amount that you’ve accumulated as home equity. Since you use your home as collateral, you must again be sure about your repayment ability.
- Fast cash advance loan: A payday loan or a cash advance loan is a short term loan that can be taken out in order to meet your short term financial obligations. The payday loans usually carry high interest rate and are supposed to be repaid within a month or on the day you receive your next paycheck.
Thus, if you want to take personal loans to seek debt relief, you must check your affordability. Don’t make the mistake of taking out a loan beyond your affordability so that you can easily repay the loan without causing much stress on your wallet.