Anytime you need to borrow money you have a variety of options: fixed or variable rate, bank or credit union, credit card or home equity loan, and so on. One particular option might pique your interest though: a personal loan. What makes these loans different?
Here at Rich Single Momma, we want to help single moms understand and be financially free. But in an event that single moms need to heed to an emergency, availing a personal loan seems to be the logical step to take. Along with our friends from Direct Finance Loans, here are some things that can help you differentiate personal loans from other types of loans:
They Have Fixed Interest Rates
Which makes them completely different compared to a home equity line of credit that has a variable interest rate which could change whenever interest rates in the economy changes. Variable-rate loans may appear more appealing at the start as their “initial” rates tend to be low. However, the rate (and payment) could rise later and could make the loan costlier (and risky) after some time.
You Have to Pay Them Back in a Certain Amount of Time
The majority of personal loans have a set repayment time period of one to 5 years. Within that time, you will be making fixed monthly payments. This makes them different from credit cards, that allow you make a minimum payment which will hardly make a dent in your balance. When you want the clarity of knowing the time your debt is going to be paid off, a personal loan could very well be your preferred choice.
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They Offer Entrepreneurs an opportunity to Prove Themselves
It’s getting harder in the last couple of years to borrow money to start or step up a small business. New businesses for instance aren’t likely going to find a bank that wants to give out a loan simply because they have a great idea for an enterprise. Banks generally like to see sales and revenue figures, which new businesses aren’t sure to have. That’s the reason several small businesses are looking towards personal loans, which they get on the strength of their individual credit and finances as an alternative to that of the business. And the interest paid on a personal loan employed purely for business purposes is usually tax deductible.
They’re the New Home Improvement Loan
Not long ago, if you planned to build your house a front porch or let’s say, do some kitchen remodelling, your bank would more than thrilled to provide you with a home equity loan to finance your project.
But these days, between stricter home loan demands and home values down in several parts of the country, obtaining a home equity loan may perhaps seem like more trouble than it is really worth. That’s the reason why a lot of borrowers are looking at these loans to fund home improvement projects. And in contrast to home equity loans, a personal loan is the best option!