Personal loan is the one in which you borrow money for your personal use. You pay the money back in future with time and also in fixed or varied amounts in every installment, along with the interest. Personal loan can be taken to buy a house or a car, to pay off credit card balance, any type of repairing or renovation in the house, medical emergency and for higher educational expenses.
Personal loan is of many types that include fixed-rate, variable-rate, debt consolidation, unsecured and secured loans. The most common type of personal loan is the unsecured one while secured is also a common type.
When you do not have any asset to sacrifice as a collateral or you don’t want to use one, unsecured personal loan is your best option. You can use internet as your unsecured loan guide or contact any bank or credit card company to obtain information and guidance if you wish to get this type of loan.
To check your eligibility for an unsecured loan, the lender would want to see your credit history. A good credit report makes you credible for the loan while a bad credit report decreases your credibility.
As an unsecured loan does not require any collateral, it is less risky as compared to the secured type of personal loan because if you fail to payback a secured loan, the lender will have a legal right to repossess your collateral asset. Where as in case of default for an unsecured loan, the consequences would not be this speedy.
But a disadvantage of an unsecured loan is that its interest rate is usually higher than the collateralized loan and the amount of loan money is lower. So, in case of failure of unsecured loan repayment, the lender can make charges against the borrower.
An unsecured loan repayment is usually scheduled within a fixed time duration and mostly fixed interest rate. Personal loans are usually paid back within one to five years.
Student loan is also a type of unsecured loan as students usually don’t have collaterals. These loans have their own specific sets of requirements, grace periods and flexible options for repayments. Credit history does not matter as long as you are a student. All you have to do is visit the people in the financial aid office of your educational institute and they will guide you.
Credit card is another type of unsecured loan. If you are approved of a credit card, you can borrow any amount of money you want instantly, whenever you want to just by using your card. The sum of loan is not any big lump. But a disadvantage of this type of unsecured loan is that the interest rates are high.
The most common type of unsecured loan is the signature loan that requires your signature only. These loans are usually paid back in installments with mostly fixed monthly payments.
Peer to peer loan is a recent type of unsecured loan in which you borrow from a person instead of from banks or usual lending businesses. You can use internet where there are websites to put a request for loan and any willing individual can lend you the money you require by checking your credit score. You can pay back in fixed installments.