Types of Personal Loan, Unravelled

Bank personal loans come with a couple of options: fixed or variable interest, and secured or unsecured loans. Both factors will affect the total cost of the loan which you can check out on our nifty personal loans comparison table (just hit 'Go!').

Fixed personal loans

Fixed interest loans give you a set rate for a period of your loan - typically five years or more - so you don't have to worry about changes in personal loan interest rates.

Pros:

• loan rates don't fluctuate, so you're not exposed to market changes
• repayments are fixed, so you can budget accurately for your bank loan
• if interest rates rise, your personal loan rates will look like a bargain

Cons:

• fixed personal loan interest rates are typically higher than variable rates
• if interest rates fall, your bank loan will look expensive

Fix me up. Where are the fixed rate personal loans?

Variable rate personal loans

Low personal loans are usually variable offering the best loan rates on the market, but with the catch that they could rise.

PROS:

• cash loans at low interest rates
• if market rates fall, so will the total cost of your loan

CONS:

• best loans today aren't always the best loans tomorrow; if rates rise, so will the cost of your personal loan
• repayments will rise if loan rates go up, making it difficult to budget for your bank loan

Low rate variable loans sound like the ticket! Let's see some bank loans.

Secured personal loans

Bank loans can be 'secured', meaning that you put up assets - such as your car or home - against the loan. The bank enjoys the security against defaulting, and you enjoy the lower interest rates that come with less risk for the bank.

Pros:

• Low interest rate loans, because lenders have less risk
• Secured bank loans are easier to obtain from reputable lenders

Cons:

• If you default on the secured loan, your lender can sell the particular assets to recover any money owed.

Brilliant! Lets go to the secured personal loans.

Unsecured personal loans

Unsecured bank loans give you access to cash even if you don't have assets to guarantee the debt typically to tide you over for a long holiday, to pay for home renovations or to avoid nasty credit interest rates (see our personal loan vs credit card page for the best loan deals).

Pros:

• Unsecured cash loans provide access to money at reasonable interest rates for people without assets
• Unsecured loans typically have lower interest rates than credit cards and many "buy now, pay later" financing deals

Cons:

• Unsecured cash loans have a higher interest rate than secured loans, as they carry more risk for the lender
• If you default on the loan, you won't lose a secured asset however, there will be grave consequences, not limited to a bad credit rating

See what unsecured loans are on offer.

Student loans.

Mozo has a snappy student loan guide which has all the insider information you'll want (or ever need to know)!