Finder may earn compensation from partners, but editorial opinions are our own. Advertiser Disclosure
7 types of personal loans
Explore options that accept collateral, allow cosigners, offer variable rates and more.
7 types of personal loans
Unsecured personal loan
- Fast application and no risk of losing collateral
- Harder to qualify for competitive rates and terms
An unsecured loan is the most common type of personal loan. It works by giving you all of the funds at once, which you repay plus interest and fees over a period of time — usually three to seven years.
What makes a personal loan unsecured is the fact that it doesn’t require collateral. This can speed up the application process, and you don’t risk losing your assets if you can’t pay it off. But it can be harder to qualify for a competitive rate unless you have strong credit and a low debt-to-income ratio.
Secured personal loan
- Easier to qualify for competitive rates and terms
- Risk losing your collateral, potentially longer application
A secured personal loan works just like an unsecured loan, only you have to back it with collateral. If you can’t pay off the loan and go into default, the lender takes the collateral to recover its losses.
Common types of collateral include savings accounts and CDs, as well as personal possessions like a car or valuable jewelry. Because lenders consider secured loans less risky, they often come with lower interest rates than unsecured loans.
Cosigned personal loan
- Help meeting requirements on an unsecured loan for a better deal
- Fewer lenders offer this option, risk damaging relationship with cosigner
A cosigned personal loan is usually an unsecured loan you apply for with another applicant, which you’re both equally responsible for repaying. Your lender often only considers the highest credit score and income between the two of you.
This makes it a viable choice if you have poor credit, little credit history or depend on your spouse’s income. It’s different from a coapplicant loan, where your lender consider both applications equally.
Fixed-rate personal loan
- Monthly repayments that are easy to plan for
- Potentially pay more than a variable-rate loan if interest rates decrease
Most personal loans come with fixed interest rates, which stay the same while you repay the loan. This means you pay the same amount each month and can predict your total loan cost ahead of time. But you might end up paying more in interest than if you went with a variable-rate loan — especially if you have a long loan term.
Variable-rate personal loan
- Potentially pay less interest than a fixed-rate loan
- Less predictable repayments with the risk of paying higher rates
Some personal loans come with variable rates, which can increase or decrease depending on changes in the economy — usually every three months. Variable rates can often go lower than fixed rates, but also come with the risk of being much higher. Since rates can change, it can be more difficult to plan ahead for repayments and predict your total loan cost.
Personal line of credit
- Access to cash for ongoing projects like home improvements
- Not ideal for a one-time expense
A personal line of credit gives you access to funds that you can draw from as needed. It’s similar to a credit card, but gives you access to cash and typically comes with lower rates. Each time you make a draw, you might either repay it in monthly installments plus interest and fees or have a minimum monthly repayment. Credit lines can be secured or unsecured with fixed or variable rates.
Debt consolidation loan
- Have a lender pay off creditors for you
- Fewer options than your standard unsecured personal loan
You can use any personal loan to pay off credit card balances and other debts to save on interest and have more manageable repayments. But some lenders offer personal loans designed specifically for debt consolidation. With these loans, the lender pays off your creditors for you, simplifying the process. While it might be easier, you have fewer options to compare and might not find as competitive a deal.
Compare personal loans
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
4 questions to help you choose the right type of loan
Still not sure which loan is right for you? Ask yourself the following questions:
5 other types of loans
Looking to pay for a specific expense? Don’t have the best credit? Here are other types of loans to check out instead:
- Student loans. Fund an undergraduate degree, certificate program, graduate degree and more with federal and private loans designed for students.
- Car loans. Buy a car with a loan that uses your vehicle as collateral, either from a dealership or private seller.
- Short-term loans. Small-dollar loans with high APRs and terms usually no longer than 18 months for all credit types.
- Title loans. Fast, high-interest financing for all credit types backed by your lien-free car title.
- Business loans. Financing designed to fit the needs of small businesses and startups, from working capital to buying equipment.
Getting the right type of loan can help maximize your savings, keep you from overborrowing or help you qualify if you can’t on your own.
Once you’ve decided on your loan type, learn what steps to take next with our guide to personal loans.
Frequently asked questions
More guides on Finder
Figure Pay prepaid debit card review
The Figure Pay card is free and earns rewards, but it lacks several standard features.
Best business expansion loans of 2021
Compare expansion loans for startups and established businesses.
Premier Members Credit Union Student Credit Card review
A student card without enough to offer to make it worth it.
ALEC Student Select Visa Review
A student 0% intro APR card with a low variable APR.
Clearview Federal Credit Union Student Mastercard Review
A simple student card that offers an intro balance transfer APR.
Student Visa® Credit Card from San Mateo Credit Union review
A decent student card, but there are better options available.
Citibank business loans review
This international bank offers term loans as low as $5,000 to business banking customers. But it’s not upfront about costs.
How to buy Polkadot (DOT)
Learn more about the DOT cryptocurrency in this beginner’s and buyer’s guide.
Your business loan results
Get matched with a business lender using our quiz. Funding options from $500 to $5 million.
Upgrade Card review
Looks like a credit card but acts like a loan. Plus, no fees all around.
Ask an Expert