What are the various types of personal loans?
Personal loans are loans that can be used for meeting all your financial needs. You can avail personal loans to buy your dream car, pay off your mortgage dues, pay your utility bills etc. Personal Loans can be availed from banks. There are many financial institutions that offer personal loans.
Personal loans can be either secured or unsecured. A personal loan is said to be secured when you use collateral. In majority of the cases, an immovable asset is used as collateral.
What are the features of a secured personal loan?
The secured personal loans attract interest rates that are much lower than an unsecured personal loan. The main reason for the low interest rate can be attributed to the fact that you are using collateral which gives assurance to the lenders that their money is safe. This is because if you fail to make regular payments, lenders/creditors take away your collateral. So, your collateral acts as a safety net. The proceeds of a secured personal loan get approved within 30 days of submitting the application.
You enjoy a longer repayment period in case of secured loans. And the amount you shell out every month is also considerably less. They are usually cost effective and it is quite rare that applications for secured loans are denied.
What are unsecured personal loans?
Unsecured personal loans are loans that don’t require collateral. The loan is extended depending on your credibility and capacity to repay the loan amount.
Features of unsecured personal loans
Since the debtor doesn’t provide any collateral, these loans attract very high interest rates. The high interest rates act as a safety net for the creditors since the lender is at a risk of losing his money, if payments are not made regularly.
Unsecured personal loans can have certain advantages too. You don’t require collateral. You are not required to go through a lot of paper work. Unsecured personal loans are available with considerable ease.
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