Do you need extra money for an unexpected expense, vacation, or home improvement project? If so, a consumer loan is one type of financial product you might want to consider. These types of loans are provided by different types of financial institutions. Some of these institutions focus solely on consumer loans, and others may have a suite of loan products and services they provide. The following points will help you to understand more about consumer loans. 

Credit Rating

Your credit rating will likely determine how much a loan company will extend to you. Some of these institutions report to credit bureaus, and this means that your score could improve by making your payments on time. Consumer loans differ from traditional loans because much of loan risk is placed on the lender, and this is why credit ratings are reviewed. You might still be able to qualify for this type of loan if you can provide proof of income to the agency. 

Interest Rate

The interest rates on consumer loans may be higher than traditional loans. This is usually related to the fact that the loan agency assumes much of the risk associated with the loan. These types of loans are also usually for emergencies or minor repair costs, which means that they can usually be paid off in a shorter period of time than traditional loans. Even if the interest rate you are quoted is high, keep in mind that consumer loans are usually fixed rate rather than variable. 

Potential Fees

Some loan companies charge fees. Application and origination fees are two examples of fees that you might incur if you get a consumer loan. Some agencies do not charge additional fees. This is why it is wise to ask in advance. There might also be additional products offered to you such as disability insurance. If you want the coverage, it would ensure that your loan payments are made if something happened to you and you were no longer able to work. 

Secured or Unsecured

Some companies require consumers to list collateral even though they do not have to give the items to them. If a borrower defaults on the loan, the company might make efforts to legally get the items listed as collateral. This is referred to as a secured loan. Unsecured consumer loans do not require collateral to be listed or kept in lieu of payments. 

A financial institution that extends consumer loans is a good resource to use to learn more about these types of loans. Some of these institutions have other loan products that might be a better fit for your situation. This is why it is important to be upfront and honest about how you intend to use the loan if you are asked. 

Do you need a loan? Contact a business such as MainSource Bank for more information.