Most banks will offer both fixed and variable rate unsecured loans. Fixed rate means that the interest rate is fixed and you will be paying the same interest rate in the entire loan term. Fixed rate loans usually have slightly higher APR interest rate compared to variable rate.
The advantage is that you know how much you have to pay every month so there won’t be any surprises that will break your budget. You may have other monthly bills that change but you can be safely assured that your loan payment remains the same.
Variable rate loans means that you the interest rate can fluctuate from time to time. For example, this month, you may pay a low rate but the interest rate may increase in the following month. As a result, you will be paying a different loan amount every month. The advantage of a variable rate loan is that it has lower introductory rate compared to the fixed rate loan. Many borrowers prefer variable loans because it helps them to save money in the beginning.
The interest rate may still go lower depending on the fluctuation of the APR interest rate. Studies have shown that people who apply for variable rate loans usually pay lesser overall interest rate compared to fixed rate loans. Despite that, there is always the chance that the rate may increase during the loan term. Therefore, if you are someone who cannot take surprises, the variable loan will not be suitable for you.
Unsecured loans means no collateral is needed to get approved for the loan. With an unsecured loans, you can borrow between $1,000 – $35,000 from a bank. Some banks offer a larger amount of unsecured loans. No matter what amount you want to borrow, you must show proof such as payslip from your employer that you have the income to pay off the monthly payment. You also must have a steady job for the past months.
Before shopping, you should always ask yourself how much you actually need to cover your expenses. You should also come up with the estimated duration that you can pay back. This can help you to borrow the right amount and choose the right loan term. Choosing an online loan term can help you to save money on the total interest rate even though you will be making a higher monthly payment.
When you select a longer loan term, the monthly payment is lower but you pay more interest rate in the end. You should also don’t forget to check all the associated fees that you are responsible to pay. There are fees like penalty fees, early prepayment fee and etc. You must spend time to read the fine print and understand all the fees before putting down your signature.