As the holidays come to a close, many people have been reminded of how strained their personal finances are. Sometimes, you just don’t have the money for the purchases you need to make. 

In times like these, personal loans are a godsend. These loans are installment loans given to a borrower without the need to use the money for a specific purchase. In this way, these loans differ from things like mortgage loans. 

Several types of personal loans exist, each presenting different options for emergency cash. If understanding the loan application process in Canada is your goal, look no further! We’ll cover the best options in the guide below.

Unsecured Personal Loans

Many personal loans fall under the unsecured category. All this means is that you don’t have to offer the lender collateral for the loan. 

Unsecured loans may have less risk for borrowers since they don’t have to worry about losing any possessions if they default on the loan. However, these loans have higher fees, interest rates, and credit requirements. 

In most cases, lenders that provide unsecured personal loans prefer to lend to borrowers with good credit. This way, they only give the loan to people who can pay it back. If you need emergency funds quickly, this may not be the best option for you.

Secured Personal Loans

Secured personal loans are a less common type of personal loan. These loans require a form of collateral.

Usually, this collateral is money that you secure in a savings account. Most often, banks are the primary lenders for loans of this kind.  

One of the most common types of secured personal loans is credit-builder loans. These are secured loans that allow people to build their credit scores. They’re often excellent choices for people who just graduated college or who have low credit scores they want to improve.

Personal Loans for Specific Purposes

Many lenders offer personal loans with specific usages in mind. For example, some lenders have pages for emergency funds or a car title loan. 

Don’t get the wrong idea, though. While lenders may advertise these loans for specific purposes, that doesn’t mean you have to use the money for those reasons. 

In most cases, these loans remain standard personal loans. Although they may be tailored for some uses, you retain the freedom to spend them however you think necessary. All that matters to the lender is that you pay them back. 

Debt Consolidation Loans

Many people take out consolidation loans to consolidate debts with higher interest rates. This approach allows borrowers to save money by getting lower interest rates.

However, the better advantage is that you receive a more structured repayment plan. This strategy helps you pay back the loan in an efficient and orderly way.

Find the Types of Personal Loans You Need!

Several types of personal loans exist in the financial industry. These could be the solution if you need extra cash for a project or major purchase. So, find the loan that works best for you today!

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