3 Kinds of Personal Loans That Banks Provide
Banks offer a wide range of financial products, including personal loans. If you need to borrow money, read on to learn about three different kinds of personal loans that are provided by banks and may be right for you.
1. Personal Loans
Personal loans are unsecured loans, which means that they aren't attached to an asset. They're given based on your credit history, credit score, and income situation, and they can be used for almost anything. Many personal loans have slightly higher interest rates than their secured loan counterparts, which are written against an asset that serves as collateral. No loan is more flexible in its use than a personal loan, though. People often use these loans to pay for medical emergencies, other emergencies, luxury items, and vacations.
2. Lines of Credit
A line of credit is a lot like a personal loan in that it's written based exclusively on your past credit and makes unsecured funds available. Also like personal loans, lines of credit usually come with slightly high-interest rates because there isn't any collateral against the lent amount.
Where personal loans and lines of credit differ is in how the borrowed funds are dispersed. With personal loans, the entire borrowed amount is given to you at the time of closing. The funds are given to you either as a check or an electronic transfer into your chosen account. With lines of credit, the funds are made available but not actually given to you. You can then draw against the line of credit as you need to, and you pay off only what you use. This can be a preferable setup if you need money available on an ongoing basis and don't have a known one-time expense.
3. Home Mortgages
Home mortgages are loans that are specifically for purchasing a house with. These loans have some of the lowest available interest rates because they're secured by the purchased home, but the funds made available through these loans can only be used to buy a house, condominium, summer home, or similar residence.
Within the category of home mortgages, there are many different types of mortgages available. Most people end up with a mortgage that meets federal stipulations for standard mortgages, but some people need a non-standard mortgage that doesn't meet these stipulations. Banks employ loan officers who can help you determine what type of home mortgage is right for you.