1Secured Personal Installment Loans vs Unsecured

The decision whether to enter into a secured loan or an unsecured loan is the first major decision you must make.

There are several differences between the two types of loans and several of them are listed below.

2Secured Loans

A secured loan requires some kind of asset to be used as collateral. Typical assets used for this purpose is a car, boat, etc. If you default on the loan, the bank would own the asset that was used as collateral.

Since secured loans don't involve as much risk by the bank, these loans are usually easier to get, have lower interest rates and are available to people who are struggling with credit issues.

3Unsecured Loans

An unsecured loan is based upon the bank's faith that you will be able to repay the loan. There is no collateral involved, but you must have a good credit score and income that clearly shows your ability to repay the borrowed funds.

Because the bank has higher risk for unsecured loans, the interest rate and monthly payments are usually higher.

4Interest Rate Comparison

Looking at the interest rate is another important consideration when reviewing possible personal installment loans. Make sure you are comparing “apples to apples” when comparing interest rates. Some banks advertise monthly rates instead of yearly rates because it entices more people to contact them.

5Monthly Payments

You should consider the size of the monthly payment you want to make when considering various personal installment loans.

Payments will be much smaller than a typical mortgage loan because the principal balance is so much smaller, however other items will also influence the monthly payments.

Personal installment loans with higher interest rates will increase the monthly payment. Payments will also be higher for loans that are shorter in length.

If you are interested in the lowest possible payments, you should consider a secured loan that is scheduled to have installments for a longer period of time.

6Look For Hidden Fees

Every lender you work with must provide you with a Truth in Lending statement that clearly discloses any fees related to the installment loan. This should include all of the terms of the loans, interest rates and any other fees.

You should review every fee shown on this document. If you are working with a non-bank lender, you should scrutinize these fees even more closely. These lenders are known for adding many types of fees to the loan that are not always necessary.

One important key is to make sure you aren't charged an upfront fee just to get the loan.  This should be a big red flag.

7Understand All the Terms of the Loan

Before entering into an agreement for a personal loan, make sure you understand all of the details.

• Some personal installment loans include penalties if you pay the loan off early
• Other loans may have an interest rate that can change
• Make sure that your budget can handle any potential adjustments

8The Final Word On Personal Installment Loans

The first thing you should do is decide the type of loan you want, how much you can afford to repay each month and then start researching.

Once you decide on the terms you are looking for, start shopping around and don’t stop until you find the personal installment loan that is the best fit for your own financial situation.

However, make sure you check out the company before you submit an application.  The Better Business Bureau is always a great resource.  If the business isn't listed there, search for "(business name) complaints" in Google to find out if people are complaining about them.

Do you have any other tips about personal installment loans to share that might help somebody else?