PERSONAL LOANS. What type of personal loan is right for me?

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1 PERSONAL LOANS What type of personal loan is right for me?

2 PERSONAL LOANS If you are considering a personal loan, it must mean you are in the market for something special in your life like a new car or new kitchen perhaps. Or you might be thinking of consolidating your credit card debt to make your financial life a little easier to manage. Whatever the reason, a personal loan can help you achieve something important in your life rather than waiting until you have the full purchase price. Personal loans are either secured or unsecured. And usually the type of personal loan you are looking for will dictate whether it is secured or unsecured. Now, let s look at these common personal loans so you can determine which type is best for your needs.

3 TYPES OF PERSONAL LOANS Automobile Loan Recreational Vehicle (RV) & Boat Loan Debt Consolidation Loan Home Improvement Loan CD Secured Loan Unsecured Loan Secured vs. Unsecured Loans Personal Credit Cards Home Equity Fixed Rate Loan / Line of Credit Fixed Rate and Fixed Term Origination Fee Prepayment Penalty

4 1 AUTOMOBILE LOAN This is a secured loan because the auto becomes your collateral. If you are looking to purchase a new or used car, you will want to use an automobile personal loan as these loans usually have very competitive rates.

5 2 RECREATIONAL VEHICLE (RV) & BOAT LOAN Again, these loans are secured because the RV or the boat is used as your collateral. These loans are typically priced competitively but it pays to shop around as you might have other loan options.

6 3 DEBT CONSOLIDATION LOAN Depending on the type of consolidation loan you choose, these loans are most often unsecured. Debt consolidation loans can truly help to manage your debt. Most often, people will consolidate credit card debt so they have one single monthly payment. The key to debt consolidation is creating a budget and changing your spending habits.

7 4 HOME IMPROVEMENT LOAN Whether you are looking to make simple repairs to your home or major renovations like an updated kitchen, a finished basement or a family room addition, a home improvement loan is a great option. If you have equity in your home, you can consider a home equity loan or line of credit.

8 5 CD SECURED LOAN Sometimes you or your bank will prefer that you offer some collateral for the loan. In this case, you can secure the loan with a certificate of deposit (CD). This is another option for a personal loan where you decide how you are going to use the loan - for example, vacation, college, emergency.

9 6 UNSECURED LOAN With an unsecured loan, you decide how you are going to use the loan. Again, the examples of how people use this loan are numerous - debt consolidation, home repairs, dream vacation, etc.

10 7 SECURED LOANS VS. UNSECURED LOANS The major difference between a secured and unsecured personal loan is collateral. Collateral is something you own that you are willing to give up if you are unable to repay your loan. Typical examples of collateral are your home, auto, other property, and investments.

11 8 PERSONAL CREDIT CARD A credit card is an unsecured loan. Having a personal credit card in your wallet is a great option to have for expanding your buying power and to use in case of an emergency. You will also want to have a credit card for travel arrangements, as most hotels and car rentals prefer a credit card to hold reservations. However, it s important to realize that every time you use your credit card, it s a short term loan, which can accrue interest depending on when you pay it off. Your purchases will usually have a 30-day billing period that gives you a small grace period before the payment is due. If you pay the full balance when it s due, you typically will not pay interest on this loan. If you only make a partial payment, you will accrue interest and that can add up quickly.

12 9 HOME EQUITY FIXED RATE LOAN / LINE OF CREDIT Another option for a loan - if you own your home, and you have built up your equity, you can consider using the equity as collateral instead of using one of the personal loans previously mentioned, You will have the option to use a Home Equity Loan or a Home Equity Line of Credit. Both will allow you to borrow money for most of the things you d use a personal loan for like home improvements and debt consolidation. One of the advantages of using your home equity is it might be tax deductible. You will want to check with a tax advisor to be sure.

13 10 FIXED RATE AND FIXED TERM Personal Loans will most likely have a fixed rate with a fixed term that is usually three to five years. When your rate is fixed, it means you and your lender agree to the rate for the life of the loan - it will not change. However, with a credit card, your rate can increase if you are past due, and you can pay on your balance for many years.

14 11 ORIGINATION FEE Most personal loans will charge an origination fee. This fee is usually included in the annual percentage rate (APR) so make sure you compare the APR of the loan and not just the interest rate.

15 12 PREPAYMENT PENALTY Few personal loans have a prepayment penalty, but it is always a good idea to ask when doing your comparison shopping.

16 1 Whatever the reason, whether it s the new car you ve been thinking about, the dream kitchen you ve always wanted, or a chance to consolidate your debt, your lender will help you decide which loan is best for your budget and lifestyle.

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