Know More About Personal Loan

Most of us are familiar with car loans, education or student loans and mortgage loans, but some people are not that familiar with personal loans. Some people need to take out personal loans for various reasons; vacation, weddings, etc. There are two main types of personal loans, secured and unsecured.

Secured Loans

A secured personal loan is one that is made with some type of collateral attached. This collateral can be an automobile, but most often is the person’s home. If an individual takes out a secured personal loan and does not pay it back, that collateral can be taken by the bank or finance company.

Unsecured Loans

An unsecured personal loan is very simple to explain. The loan is made on the signature of the individual involved with no collateral needed. Many times these loans are only made to individuals who have good credit scores or good credit history. There is no backing for the money, but those who have maintained good credit histories more than likely can be counted on to repay the money.

Who Lends the Money?

After asking yourself what is a personal loan, you may be wondering who makes these loans. The usual lender is a bank or a finance company; however, some personal loans are being made by payday loan companies or cash advance entities. This can be a bad choice for a personal loan, unless you have bad credit and really need money. These types of loan companies charge huge interest rates, many times 100 percent or more, so in the case of a 1000 dollar personal loan, an individual can find themselves paying back 2000 dollars or even more.

When a regular bank or finance company makes the loan, the individual will usually receive a payment book in the mail or monthly statements indicating their monthly due date and the amount owed, with the balance still owed. For payday loan companies, the payments are usually required to be attached to the person’s bank account, so that the company can debit the amount automatically.

Personal loans, as stated above, can be taken for many different reasons. If you are interested in taking out a personal loan, take the time to review all of your options, whether you use a traditional lender or a high interest rate lender. You will want to know all the details before making this important decision.


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