There are many different types of personal loans, but they all have one thing in common: they're all for a fixed amount. A loan means that you are given the money in tangible cash - if you borrow $1000 from a lender, you get that money in your hand. A line of credit means that you are given a credit card or a bigger limit on an existing credit card to use for whatever you wish. This works exactly like a credit card does - if you go over your limit, your interest rate will go up and often you'll be liable for extra charges.

There are three characteristics that all personal loans have:

• Loan repayment terms. This is the time period in which you have to repay the loan given to you. If your lender is a friend or parent, you might have a long time to repay the loan. However, if you go through a financial institution, you will have a set time in which to repay your loan. Non-repayment can result in the bank taking serious measures. Most loans are repaid by monthly or biweekly payments. Your lender will determine the repayment terms of your loan.
  


• Interest rates. Different loans will have different interest rates. This is also variable with your credit score. If you're with a lender that's a friend or a parent, you might not experience any interest rates. If you're with a commercial lender, you'll definitely have to pay interest. With certain loans, a missed payment or a late payment can make your interest rate go up. Interest will be calculated on how much you borrow and how long it will take you to pay it back.
  


• Security/guarantors. Many lenders will ask for collateral, something of value you'll provide them to ensure that their loan to you will be repaid. Sometimes, this can be your house's worth, or something else of great value. However, not all personal loans are secured. Lenders will ask for collateral for big loans. However, if your credit is bad or you're a young person, you might be required to provide guarantors, or people who will ensure the loan will be repaid in the event of your defaulting or dying. These people might also be required to co-sign the loan with you.

There are lots of lenders eager to offer you a personal loan. Banks and financial institutions might be a good place to start, but often they'll deny your loan request if your credit isn't good. Know your credit score before you go in; if it's bad, consult with a credit counselor to learn how you can better it. Once you've got good credit, a bank will run a credit check on you and ask you your reasons for wanting the loan. You'll fill out an application and wait, normally up to seven days, to hear. This works for credit cards, as well.

If you're not sure about a lender, the best thing to do is shop around. Do your research. If someone is willing to offer you a bad credit loan, look past the incentives to the hidden conditions. Make sure to read all of the fine print. Failure to repay a loan can result in foreclosure of your cars or even your home.

Before you take a personal loan, ask yourself this: Do you really need it? How much can you afford to pay every month? Interest can really cripple someone and getting into debt will also destroy your credit. Make sure you're really ready for the responsibility of a personal loan before you decide to take one out. Use a loan repayment calculator to help you determine how long it will take to pay off your debt.

A personal loan is a wonderful thing - it could mean your next home remodeling project or that swimming pool you've always wanted to build. However, personal loans are a bit of a double-edged sword. Borrow money wisely and you'll have little problem with debt later on in life. After all, a credit-based society means you can get whatever you want - and realize your dreams that you maybe couldn't afford before. Be wise and you'll reap the benefits when your credit stays good and your debt stays low.

Credit Ave features numerous articles with consumer information about personal loans.