There are many different types of loans that you can take out personally with very little or no collateral. Depending on your situation and what you plan on using the money for, these different lending options may help you meet your needs.
A personal loan is a loan that is guaranteed by your personally, similar to a credit card. However, personal loans are usually written and handled by a bank, and the bank looks at your banking history as a client to determine if you are eligible for a loan.
Personal loans typically are available for a larger amount than other types of loans that don’t require much collateral, and they also usually have longer repayment periods, upwards of 5 years in some cases. However, the interest rates on personal loans are similar to that of credit cards, so be careful.
A payday loan is another type of personal loan that is guaranteed by your paycheck – well, your future paycheck. In order to get a payday loan, you typically have to write the lender a check that covers the full amount of the loan plus all fees associated with it. If, for some reason, when the loan is due and you don’t pay, the payday lender will then cash your check to get reimbursed for the amount.
Where you can run into trouble with these loans is that the interest is very high, and the amount you can borrow is typically very low. If you can’t pay and you check doesn’t go through, the lender will roll you into another loan and another set of fees, which can trap you in a cycle.
Finally, the last type of personal loan is a pawn loan. This type of loan is issued in exchange for some type of collateral, like an iPad. You would take your iPad into the pawn shop, and agree on a loan amount, which will typically be about half the value of the item. If, for some reason, you don’t pay, the pawn shop will sell your iPad to cover the cost of the loan.