Personal loan is the common type of loans that are proposed to individuals by banks and financial institutions. There are a lot of different types of loans, such as a student loan, mortgage, car loan, etc., that have specific rules and can be more useful for some situations.
A personal loan can be secured or unsecured:
- If the borrower would like to buy something expensive (not real property or car because there
are specific types of loans for them), he/she can pledge this items as collateral to receive
less interest rate or fees.
For example, the borrower can buy home appliances or furniture using the loan.
- Rarely, if the item can't be pledged (for example, a mink coat or other clothes), the borrower can propose other collateral to receive more convenient conditions of the loan.
- Sometimes, banks or financial institutions can propose lesser interest rates for the borrower without any collateral but with guarantee of their employer. This kind of personal loans also can be classified as secured loan.
The interest rates and other fees of the unsecured personal loans are higher than for targeted loans. Even secured personal loans usually have:
- less convenient conditions than specific loans, such as student loans, mortgages, etc.
- more convenient conditions than credit card debt.
See loan and types of loans for more details.
- In some countries, there are huge amount of types of personal loans, such as loans for young
families, for just married, for new house holders, for travelers, etc.
Every type of these personal loans has some differences, learn them, be sure to choose that you exactly want.
- Banks and financial institutions don't often show exactly how loans work and what they cost,
so be very careful and always try to understand how much you should pay for any type of loans.
Don't hesitate to ask questions, even ask to printed copy of your future payments to see exactly how much they expect to receive from you!