There are many types of loans out there, most of them designed to do something specific. A mortgage is used to buy a house or property. An auto loan is used, believe it or not, to buy a car. Personal loans, however, are kind of like utility players on a baseball team. They can be used for anything.

Do you want to take a vacation and pay for it over time? A personal loan is a fantastic way to do just that. The interest rates are nowhere near as bad as most credit cards, and you’ll come out further ahead if you borrow the money up front in the form of personal loans than if you just wing it and pull out the plastic every time something catches your eye.

Personal loans can also be used for emergencies. They’re certainly much better than a payday loan, both because they give you much longer to repay the loan and because the interest rates are much more attractive. Whatever it is you find yourself in sudden need of, these versatile loans can be the perfect way to take care of it.

Remember, when you take a personal loan, it doesn’t really matter what the money is for. In many cases, banks won’t even ask. As long as you have decent credit and are capable of repaying the loan according to the lender’s terms, they are more than happy to lend out money for just about any cause.

There are basically two types of personal loans. They are, briefly:

• Unsecured personal loans. These are loans which don’t require you to offer anything as collateral. Some banks reserve them for those with good credit, but other lenders will still offer unsecured personal loans to those with shaky credit. Be aware that the interest rate is a bit higher on unsecured loans, so you’ll be paying more for the money you borrow.

• Secured personal loans. With these loans, you offer up something of value which you own outright. The idea is that if you default on your loan, the bank has the right to claim your collateral (the property you offered). You get to keep and use the item(s) during the course of the loan. In most cases, banks are happy to work with you even if you fall behind in your payments. Banks aren’t in the business of making money off of seized collateral, they’re in the business of making money off loan interest.

Photo via Alex E. Proimos