Personal loans provide people with an amount of money to realize their desires. They are available in both secured and unsecured forms and it’s your discretion to choose among the two provided that you have suitable collateral to post for a secured loan. These loans are distinct, since you are free to spend the loan amount in whatever way you wish. A disciplined approach towards repayment will also support and consolidate your credit rating with banks and lenders in general.
A personal Loan to Serve Your Personal Desires and Needs
Some personal loans are only lent for specific purposes. These loans include loans for cars, loans for purchasing furniture, renovations and upgrades. Some loans are even for down payments on homes, although this is generally frowned upon by lenders. Personal loans that are open to consumers to spend on whatever they desire are very flexible since the lender really does not care what the money is spent on as long as you can repay the loan on a monthly basis until the loan is totally repaid. Consumers may use these personal loans to consolidate other loans, or to consolidate credit card balances to avoid high interest rates or to pay for a vacation that they are planning. There are literally thousands of reasons consumers need personal loans and they borrow money like this almost every day.
Unsecured Personal Loans
There are two types of personal loans. The first is an unsecured personal loan that is loaned to the borrower based on their personal credit rating and their promise to repay the loan as per the terms that are agreed. Generally these borrowers must have a job that allows them to meet the monthly payments and all of their other regular expenses, they will need a good credit rating, and they will need to ensure that they have a bank account to deposit the loan proceeds into and to withdraw the payments from. Lenders have a variety of requirements and will sometimes relax these requirements, but will usually charge a higher interest rate to compensate for what they perceive to be increased risk.
Secured Personal Loans
The second type of personal loan is a secured personal loan. This type of loan has all of the same requirements mentioned above plus one additional requirement. The borrower must be able to provide some sort of equity to guarantee the loan. The most common type of security that is provided is a car for car loans, the equity in one’s home over and above the existing mortgage if there is one and securities. Securities are often discounted by 50% to allow for potential devaluation if the market was to decline significantly. In return for providing this collateral, lenders recognize that there is less risk since no one wants to risk losing their car or home etc, the lenders will provide secured loans that are at a lower interest rate than other types of loans.
Personal Loan Repayment
All consumers can improve and / or maintain their credit ratings by always repaying their loan as per the agreed to terms of the loan. If a monthly payment is required always meet your monthly payment etc. Your credit rating will usually increase and make it easier to obtain loans in the future at more competitive interest rates. Failure to meet your payments will negatively affect your credit rating and probably cost you money as well, since there will be additional interest charges as well as their could be penalties levied by the lender. Always meet your loan repayment obligations to avoid these negative impacts.