If you are like most people you will at some point need a loan. But not all loans are created equal. Today we will discuss the top three types of personal loans by frequency of use.

Payday loan: This type of funding is tied in directly to your paycheck. Funds are dispersed right away, typically at the cashier counter or if the loan is obtained online directly deposited into your account. The amount you can borrow is typically a % of your next paycheck, hence the term payday. These loans are designed to get you to the next payday in case you need emergency money. They tend to have very high interest rates and should be used only when necessary.

Unsecured bank loan: This is pretty much the opposite side of the spectrum. These loans are based on your credit score, payment history, debt to income ratio, total income and other factors that determine credit worthiness. They tend to have lower interest rates and longer approval times. Repayment can be set anywhere from 6 to 60 months depending on the amount borrowed and other factors.

The third and final type includes all privately funded loan types (meaning not government like a bank). This includes everything from secured title lending to loans secured at the time you purchase an item, such as a car. This group has varying interest rates and fees that depend on the lender, the credit worthiness of the borrower, and the category that it falls into. Secured loans tend to have lower interest rates for example.

To summarize, there are three categories of loans The first is tied to your paycheck directly, it is short term and high interest. The second would be a personal loan acquired from a bank, this is harder to get but you’ll have more time to pay it back and it has lower interest. Finally you can get money from another type of private lender, either secured or insecure.

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