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12 Types of Personal Loans: Pros & Cons of Each

12 Types of Personal Loans: Pros & Cons of Each
Sulaiman Abdur-Rahman
Sulaiman Abdur-RahmanUpdated February 22, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Personal loans are consumer lending products that provide you with a lump sum of cash to be repaid under terms and conditions of a loan agreement. Here are 12 different types of loans that consumers can take out for personal reasons:
  1. Unsecured Personal Loans
  2. Secured Personal Loans
  3. Fixed-Rate Loans
  4. Variable-Rate Loans
  5. Debt Consolidation Loans
  6. Co-Signed Loans
  7. Personal Lines of Credit
  8. Vacation Loans
  9. Wedding Loans
  10. Revolving Credit
  11. Installment Loans
  12. Payday Loans
We describe each of these loan types below and explain their pros and cons.

1. Unsecured Personal Loans

An unsecured personal loan is a financial lending product that provides borrowers with a lump sum of money to be repaid over a specified term without any requirement for the borrower to provide any assets as collateral. 

2. Secured Personal Loans

Secured personal loans are financial lending products that require borrowers to offer collateral as a condition of receiving a lump sum of money to be repaid over a specified term. Collateral could be any tangible asset you own, such as a vehicle or residential property.The major difference between unsecured vs secured loans is the latter requires collateral as a condition of approval. Secured personal loans have the following pros and cons:

3. Fixed-Rate Loans

Fixed-rate personal loans are financial lending products that provide borrowers with a lump sum of money to be repaid over a period of time under a fixed rate of interest in addition to any outstanding principal payments. The fixed interest rate will never change during the life of the fixed-rate personal loan.

4. Variable-Rate Loans

Variable-rate personal loans are financial lending products that provide borrowers with a lump sum of money to be repaid over a period of time under a rate of interest that may change during the life of the loan based upon market conditions.

5. Debt Consolidation Loans

Debt consolidation loans are personal loans that allow consumers to borrow a lump sum of money to help pay down other debts. For example, consumers with large credit card balances comprising principal and high levels of accrued interest may consider a debt consolidation loan to simplify their debt burden and monthly repayment obligations.

6. Co-Signed Loans

A personal loan with a cosigner is a financial lending product in which an applicant applies for a loan with the assistance of a cosigner who shares the financial responsibility of repaying the loan as a condition of approval.

7. Personal Lines of Credit

A personal line of credit is a revolving lending product that may allow you to borrow a certain amount of funds for personal spending purposes. Personal lines of credit give borrowers versatile financing comparable to a traditional personal loan but are constrained by a defined monetary limit on how much funds the borrower can access and spend.

8. Vacation Loans

Vacation loans are personal loans permitting the borrower to spend the money on anything related to a vacation. Borrowers can obtain unsecured vacation loans to finance a major getaway.Vacation loans provide the borrower with a lump sum of money to be repaid over a period of time under the terms and conditions of a loan agreement.

9. Wedding Loans

Wedding loans are personal loans that may allow borrowers to finance any expenses related to a nuptial ceremony. Such expenses may include engagement rings, wedding bands, catering, photography, and honeymoons.

10. Revolving Credit

Revolving credit is any consumer lending product that allows you to borrow money or make purchases through accessible credit that is restricted by a borrowing or spending limit. Revolving credit includes credit cards, personal lines of credit, and home equity lines of credit, and revolving credit replenishes automatically whenever you make repayments on the account.

11. Installment Loans

An installment loan is a lump sum of borrowed money that consumers may repay over time with a fixed number of scheduled payments.Installment loans can include personal loans, student loans, auto loans, mortgages, and home improvement loans.

12. Payday Loans

Payday loans are quick personal loans that can provide consumers with small sums of cash on short notice. Borrowers are typically expected to repay these loans in a matter of weeks or months, and payday loans may feature high fees ranging from $10 to $30 for every $100 borrowed.

The Takeaway

Lenders may disburse personal loans for a wide range of consumer needs. From weddings and vacations to debt consolidation and financing for unplanned expenses, borrowers may use personal loans for almost any personal purpose.Lantern by SoFi can help you find and compare personal loan options today. Just provide basic information about yourself and the loan you need, and Lantern can guide you in the process to apply for a personal loan with the lender of your choice.
Photo credit: iStock/vitapix
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SoFi Loan Products SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636. For additional product-specific legal and licensing information, see SoFi.com/legal.SOLC112231

About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and currently serves as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.
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