Personal Loans

What are personal Loans and how are they different from other types of loans?

Many times you would have experienced financial crisis. During such events you would have borrowed money from your neighbour or acquaintance. These kinds of loans which are available in banks and other financial institution are known as personal loans .A personal loan can be a secured or unsecured one depending upon the company's practices, your credit history etc Have a look at more on personal loans from this article.This article covers

• What are personal loans?
• What are its uses?
• What are the types in it?
• Benefits of secured and unsecured loans
• Who will provide personal loans?
• How one can avail personal loans?

A personal loan is a sum of money that an adult person borrows to meet his financial needs and requirements. An individual can take an easy personal loan or a guaranteed personal loan for a variety of reasons. Loans for personal debt help provide funds to purchase that dream boat or car, pay for your mortgage arrears or home improvement requirements- in fact personal loans help meet most of the financial emergencies that an individual can think of.

Personal loans are often the most preferred type of loan on account of their flexibility. The two most common types of personal loans are:

• Secured Loans and
• Unsecured Loans

Both these options are linked to the choice that one can use any fixed asset to serve as collateral to secure an easy personal loan.

A Secured Personal Loan Is Distinguished By the Following Characteristics

• The loan that is secured against some sort of fixed or immovable/movable asset is known as secured loan.
• This sort of guaranteed personal loans is easily available on account of the collateral that is provided alongside; thereby making the lending institutions more comfortable in forwarding the loan.
• Secured personal loans involve rates of interest that are much lower and easy options for repayment.
• Due to the collateral that is provided, banks and financial institutions usually are unperturbed by defaults in payments or by debts that are pending.
• Secured personal loans are made available to the individual within a period of thirty days after submitting an application.

How Does A Secured Personal Loan Benefit the Borrower And the Lender?

1. Secured Personal Loans can be repaid over a longer period of time, with a lower monthly payment.
2. They are cost effective on account of the low rates of interest charged on the loan.
3. Since the loan has been secured by pledging the assets of the borrower, the risk to the lender's investment is greatly reduced.
4. Their easy availability is another factor. Very few loan applications for secured loans are turned down; since the loan would be secured on the strength of the borrower's assets

Is An Unsecured Personal Loan A Viable Alternative To The Secured Loan?

• In such a loan, the sum of money given by the bank or by the financial institution is not secured by any collateral.
• The financial institution gives the loan solely based on the credit worthiness of the individual concerned.
• As this loan is unsecured, the lender's risk in the investment is high, and therefore the borrower is charged a higher rate of interest than those applying for a secured loan.
• Apart from this, the lender also conducts a thorough check on the financial worth of the individual applying for the loan.
• While the loan amounts can extend anywhere between 500 and 25, 0000 pounds, the rates of interest are higher on account of the risks involved.
• These sorts of loans are usually reserved for tenants, for those persons who do not own homes, and for those who are not in any position to offer any collateral.
• Because there is no collateral to secure these loans, lenders are usually wary of giving large sums of money.
• In case of default on the part of the borrower, then the lender would have no option but to resort to the clauses of the credit agreement, and approach legal aid to help recover the money.

The Benefits behind an Unsecured Personal Loan

• There is no requirement of collateral, and the borrower need not pledge his assets to procure the loan.
• There is no necessity for documents regarding the borrower's tax returns, or for financial statements. The information on the borrower's financial background need not be verified by supporting documents.
• Quick approvals, and an easy application process, are other attractive benefits of this loan.