When I first started learning about the finance industry, I was very curious about who gives out personal loans. I assumed back then that banks didn’t give them out. However they sometimes do. There are actually a lot of different sources for personal loans and this lesson will teach you about some of the different ones.

Bad Credit Personal Loans

These loans are generally given out by cash advance/payday loan lenders. While these are probably the most accessible of all loans, they are also the most expensive. They have super high interest and generally also have super high fees. If you take one out, make sure that you understand exactly how much it’s going to cost. If you don’t look into it, it will cost much more than you would anticipate.

The payday loan industry is well known for charging crazy high fees and interest rates. These loans can be pretty predatory and people that take them out often fail to pay them back. When this happens, fees compound and that makes it a lot more difficult to pay them back. Obviously this is a vicious cycle and it leads to lots of problems. I would personally avoid this type of loan if it’s at all possible.

Unsecured Personal Loans

This is the name that most banks use for personal loans. They also use the name signature loans. Generally speaking, these will be the name that the bank uses to describe a loan that isn’t secured by collateral. They do offer these loans and a bank is generally the best place to get a loan that’s for personal use. You can expect to pay around 12% if you have good credit – more if you don’t. When you compare this to a cash advance or payday loan, it’s honestly a lot better. If you can get approved at a bank, that’s going to be your best option.

Private Lenders

This type of loan is the hardest to find. Sometimes you can find individuals who will provide these loans, and they will generally call themselves ‘hard money lenders’. You can also talk to family and friends about getting a loan but if that was an option for you, you probably wouldn’t be reading this article. Hard money loans generally don’t have the greatest terms. They generally have high interest and these lenders usually show very little mercy if you pay late.

Usually when you get a private loan, the lender will want you to sign a promissory note and will often put a lien on some kind of personal property to secure the loan. You would basically only use this type of loan if you didn’t have any other options.

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