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What are the Different Types of Personal Loans?

In order to serve a wide range of borrower needs, there are several kinds of personal loans. Each has unique features, terms and interest rate which will vary depending on the lender. Most credit unions and banks will offer all or some of these types of personal loans.
In this article, the Credit Union of Southern California (CU SoCal) explains how to choose the right type of personal for your needs and how to maximize its value.
For over 60 years, CU SoCal has provided quick pre-approvals, no application or funding fees, and other great benefits for our valued Members.
Call CU SoCal at 866.287.6225 to schedule a no-obligation loan consultation, or apply online today!

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What are Personal Loans?

Personal loans, also called “consumer loans,” are offered to individuals by credit unions, banks, and even online lenders. They were created to provide individuals with quick, easy access to money in a hurry. Personal loans are a good alternative to paying for large purchases using credit cards, which tend to have lower credit limits and higher interest rates.

What Can Personal Loans Be Used For?

Personal loans can be used for any purpose, but are typically for large expenditures, such as making home renovations, starting a business, paying medical bills, consolidating high-interest debt, or paying for a wedding, funeral, or college tuition.

Personal Loan Categories

Personal loans come in many different options and although they achieve the same goal (providing a borrower with money), each type of loan has unique terms and conditions.
Before deciding on a personal loan, decide how much money you need, how much time you may need to pay it back, and how much you are willing to pay in an interest rate to get the funds. Knowing how you’ll use and repay the money you borrow will help you select the loan that works best for your unique situation.

Kinds of Personal Loans

Secured Personal Loan: A secured loan requires the borrower to pledge an asset to the lender — such as property, the balance of a deposit account, or a car — to “secure” the loan. If the borrower does not pay the loan in full, the lender can take possession of the asset that was used as security (also called collateral). A mortgage loan and vehicle loan are examples of secured loans.
Unsecured Personal Loan: An unsecured loan is offered by a lender based on the applicant’s creditworthiness (not collateral/security). No collateral is needed in order to get an unsecured personal loan. Non-payment of the loan will negatively affect your credit and result in penalty fees charged by the lender.
Fixed-Rate Loan: This refers the interest rate on the loan amount. A fixed-rate loan has a fixed interest rate for the life of the loan. There are also “adjustable rate” loans that have a variable rate, meaning that you could pay more or less interest on the loan balance, depending on the how the rate fluctuates. The lender can provide you with details on how the variable rate is determined.
Debt Consolidation Loan: This loan is used to consolidate debt that has a higher interest rate than the consolidation loan rate. The goal is to give the borrower a way to take their multiple high-interest rate debts and consolidate them into one easy to manage loan payment at a lower interest rate. For example, if you have a credit card debt and pay 18% interest on your outstanding balance and another card with a 22% interest rate, you can consolidate the balances from these accounts into one debt consolidation loan with a lower interest rate. This will save you money each month. These loans can be used to consolidate any kind of debt including student loans and medical bills.
Co-Sign Loan: Getting a loan with a co-signer means having another person sign the loan with you. If you have bad credit or no credit history, having a co-signer makes getting a loan easier because it gives the lender additional assurance that the loan will be repaid. The co-signer should be aware that they are accepting full responsibility to pay back any payments missed by the primary signer/borrower, and even pay back the full loan amount if the primary borrower is unable to pay. This can negatively affect the co-signers credit.
Personal Line of Credit: This is an unsecured line of credit that you can get from any credit union or bank. The dollar amount that you are approved for be deposited into an account, so you can withdraw the amount you need when you need it. As with other credit, you will receive a monthly bill and need to make on-time monthly payments on the amount you borrow. CU SoCal offers a fixed interest rate personal line of credit of up to $30,000.
Payday Loan: According to, these loans are for small amounts, and many states set a limit on payday loan size. $500 is a common loan limit although limits range above and below this amount. A payday loan is usually repaid in a single payment on the borrower’s next payday, or when income is received from another source such as a pension or Social Security. The due date is typically two to four weeks from the date the loan was made. The specific due date is set in the payday loan agreement.
Credit Card Cash Advance: If you need cash in a hurry, getting a cash advance can be as quick and easy as a trip to the ATM. But that convenience comes with a price — a high interest rate. All credit card companies set a limit to how much of a cash advance each customer is allowed, so check with your credit card provider so you know your limit and the interest rate you’ll be charged.
Pawnshop Loan: With this type of loan you, as a customer, would visit a pawnshop with a piece of property to pledge as collateral, and in return, pawnbrokers lend you money on the spot. Pawnshop loans can be made on any item of value that the shop agrees to take, including jewelry, power tools, electronics, firearms, musical instruments, and sporting equipment such as bicycles and surfboards. If you do not repay the loan under the specified terms, the shop keeps the collateral property.
Credit Builder Loan: Offered by credit unions and banks, this loan can help individuals who have a low credit score or no credit history. With the CU SoCal Credit Builder Loan, a share certificate for $1,000 is established in the borrower’s name, and while you do not receive funds up-front, after making payments for one year, you receive $1,000 cash plus interest. A Credit Builder Loan can build your credit score when your on-time payments are reported each month to all three major credit bureaus. Credit scoring companies, including FICO, will see the loan in your credit report and give you points for adding to your credit mix and making on-time payments.
Vacation Loan: A vacation loan is essentially a personal loan created to help people fund travel-related expenses, including flights, hotels, car rentals, etc. These loans can also come with a high interest rate, so be sure to compare this rate to your credit card rate and see which is lower.  

Where to Get a Personal Loan

Different types of personal loans are available from credit unions, banks, and online lenders. Each lender will offer different rates and terms, so be sure to shop around and ask questions. We always recommend starting by talking to a representative where you currently have your checking and savings accounts. Taking advantage of established financial relationships will make the application and funding process quicker and easier.
Banks: Traditional banks tend to have higher credit score and income requirements than credit unions. If you happen to have bad credit, getting a good rate on a personal loan from a bank could be challenging. If you need the money in a rush, banks may take longer to release funds, so ask how long the approval and funding processes will take before you apply.
Credit Unions: As not-for-profit organizations, credit unions reinvest profits back into the organization, so Members benefit from lower interest rate loans. Typically, credit unions will waive fees or charge lower fees than a bank. CU SoCal does not charge fees on personal loans.
Online Lenders: While numerous online lenders offer personal loans, they can’t offer the personalized service of a credit union or local bank. They may also have higher interest rates. Be sure to compare rates and fully understand the terms of the loan. When borrowing money online, be sure to verify that you’re working with a reputable company and not a scammer. Here are some tips from the Federal Trade Commission on avoiding scams.
For more details read “Where Can I get a Personal Loan at a Good Rate?

CU SoCal Personal Loans

CU SoCal is helping Southern Californians get the funds they need to pay for life’s necessities. Our personal loan features include:

  • Financing from $500 to $30,000
  • Terms up to 120 months for the lowest possible monthly payment
  • Line of credit option for access to funds when you need it
  • No application fee
  • No prepayment penalty
  • No funding fee

 For details on options from CU SoCal, visit our page Personal Loans

Why Savvy Consumers Choose CU SoCal

For over 60 years CU SoCal has been providing financial services, including car loans, personal loans, mortgages, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation consultation with a personal loan representative.
Get Started on Your Personal Loan!

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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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