Many people at one point of their lives will need financial assistance for a variety of reasons. Maybe it is to pay for a new home, maybe a new car, starting a new business or maybe it will be utilized for emergency purposes like hospital and medication bills. So many people are resorting to get a loan in order to overcome their current financial difficulties, for whatever reason it may be. These are referred to as personal loans. These have no definitive purpose and is in fact used for general expense. It doesn’t even have to be secured. Among all types of loans, personal loans seem to be the most popular. If you are looking to apply for a personal loan, it is best that you know what are the many different types of personal loans and what’s best for your current situation.
A secured personal loan is the type of credit transaction that is acquired by the borrower by offering a security interest in the form of collateral. This can be in any form of personal property like a house, car, jewelry and many more. The borrower will receive a loan amount that is based on the appraised value of the collateral the he or she has provided. If the borrower fails to meet the agreed terms and conditions of the payment, then the lender can legally seize the collateral that was provided. This is a popular type of personal loan because of its generally low interest rate and also because it is easy to qualify for this type of loan.
In contrast to secured loans, this is an option for borrowers who don’t wish to offer a collateral. This way, this poses a lower risk for the borrower in case he or she fails to pay it on time. This type is usually approved based on the credit worthiness of the borrower, so this means that qualifying for an unsecured loan is difficult when compared to secured ones. This type of transaction is more risky for the loan provider, so in order to offset this, the interest rate in with unsecured loans are higher. In addition to that, the total sum of the loan that the borrower can get is very limited.
Debt Consolidation Loans
A debt consolidation loan is obtained by consolidating a multiple number of loans into a single payable one. Instead of giving the loan directly to the borrower, the money will be given to the creditors of the borrower, so now the number of creditors is down to one. This is a viable option for those who have multiple debts from numerous creditors because this gives them the convenience of worrying about a single loan instead of multiple ones.
These are just some of the many types personal loans. So whatever your reasons are for applying for a personal loan, it is best that you know the different types of personal loans so you are aware what your options are.