We will be discussing today the different types of personal loans, and some advantages and disadvantages of them. The most common type is when an individual borrows money to purchase a specific item. This may be a car for example. In essence you aren't really borrowing money at all but rather you are borrowing the item until you've paid for it. The item remains the property the lender until the loan is paid back. If you make all your payments on time and have no other issues the item becomes yours once your balance with the lender reaches zero.
This first type is consider a variant of secured loan. It is considered secured because it is backed by an asset. Another way that borrowed money can be secured is by offering up something that you already possess as security. A second mortgage is a good example of this, ownership doesn't actually transfer to the lender, but they have the right to take the asset if you don't pay them back. Both types of secured loans have the advantage of typically having lower interest as they represent less risk to the bank than the last type mentioned below.
The final category of loans are the unsecured type. This means that there is nothing backing it. They are simply relying on your good credit and repayment history to reassure themselves that you will pay it back. These tend to have higher interest, but you don't have to worry about collateral either. No matter what type you decide to get, you should read the terms and conditions carefully and make sure you are borrowing money under conditions you are comfortable with.
This first type is consider a variant of secured loan. It is considered secured because it is backed by an asset. Another way that borrowed money can be secured is by offering up something that you already possess as security. A second mortgage is a good example of this, ownership doesn't actually transfer to the lender, but they have the right to take the asset if you don't pay them back. Both types of secured loans have the advantage of typically having lower interest as they represent less risk to the bank than the last type mentioned below.
The final category of loans are the unsecured type. This means that there is nothing backing it. They are simply relying on your good credit and repayment history to reassure themselves that you will pay it back. These tend to have higher interest, but you don't have to worry about collateral either. No matter what type you decide to get, you should read the terms and conditions carefully and make sure you are borrowing money under conditions you are comfortable with.
2 comments:
Personal Loan comes in two categories i.e. secured and unsecured loan. Secured personal loan demands an asset to pledge as collateral whereas an unsecured loan is a collateral free loan. One can avail any offer according to the capability to provide a collateral.
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