Every now and then, you may come into a situation where you need to borrow money to make ends meet.  Maybe your car breaks down and you need to buy a new one.  Maybe you have some unexpected home repairs, and need a cash infusion to get it done.  Whatever the case, you need to make sure that you do your homework on the right loan to meet your needs.

Collateral Loans

Collateral loans are just like they sound – backed by something physical or tangible.  These loans usually have better interest rates because they are more secure for the bank or creditor.  For example, a car loan would fall into this category because the loan is backed by the equity in your vehicle.  If, for some reason, you default on the loan, the bank will repossess your car and sell it to make themselves whole again.

Non-Collateral Loans

Non-collateral loans are loans that are not backed by anything physical, except your ability to pay them back.  These loans include personal loans, payday loans, and even credit cards (unless you get a secured credit card).  These types of loans are riskier for the bank or lender involved, and so they usually have more fees involved and higher interest rates as well.

Do Your Homework

Whatever lending option you think will meet your needs, it is important to do your homework when getting a loan.  You may think about going to a bank that has all of these options in one place. That way, you can talk with a representative and figure out what loan option is best for your needs and situation.

No matter what you choose, make sure that you pay attention to rates, fees, and due dates for payments and total repayment. You don’t want to find yourself in a worse situation once you’ve borrowed the money.