A Lowdown on Secured and Unsecured Personal Loans

An advantage with personal loans is that these can be used for almost any purpose. These loans are relied upon by households to get them through periods of poor liquidity. As with all loans, personal loans too are offered based upon the borrower’s ability to afford these loans. Your credit history and the ability to furnish collateral decide whether you get an unsecured loan or a secured loan – of course the major difference between the two being the interest rates charged. A secured personal loan will come with more agreeable terms for the borrower.

Your objective behind the loan may also play a role in whether you go for a secured or an unsecured personal loan. A house owner wouldn’t really go for an unsecured loan for funding a vacation but may do so to purchase a car if he thinks he’s getting a good deal on it.

Lenders often prefer to give a secured loan because in the event of non-repayment they have collateral to fall back on and recoup the amount. With an unsecured loan there isn’t much a lender can do if the borrower defaults on payment.

Unsecured loans are of shorter duration as compared to secured loans. They can have a term of six months and can stretch up to 120 months. Secured loans on the other hand can have a maximum period of up to 30 years. If you are perceived as a credit risk then the lender may be willing to offer you only a secured personal loan. This happens to people with bad credit records. Personal loan providers may insist on payment protection insurance. This allows loan repayments to continue should the borrower gets injured or is unemployed and therefore unable to make loan repayments. You do not have to take this insurance policy if you don’t want to.

The lender will make the money available to you via personal check or an electronic transfer. A lender may ask for a direct-debit access to your account; it is in your favor too to have a direct-debit from your current account. This minimizes your chances of missing out on a loan repayment and incurring additional interest.

Once you sign on the terms and conditions of a personal loan, you are bound by them. Therefore, read the documents carefully before you commit yourself to anything. Contact the lender if you sense that repayments are going to be an issue with you for some time. Do not delay on this.

Finding personal loans online is easy. You can visit online lending sites that will match you with the right loan type and lender depending upon the information submitted by you. Compare loan features before you narrow down your choice of personal loan providers. Monthly repayments, APR, fixed interest or variable interest rate, payment penalties, etc are some of the features that you should compare.

You should ensure that you go for a personal loan only when you know that you some clear and pressing requirements. This is because even an enquiry for a loan gets reflected on to your credit score and stays there for a year. If there are multiple enquiries over a period of time, you may be interpreted as a high-risk borrower.

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A Lowdown on Secured and Unsecured Personal Loans

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