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Borrowing and lending have been an essential part of all societies,
since money is the primary requirement necessary for fulfilling all
human desires. In the successive years, the credit industry has introduced
various specialized types of loans. But only personal loans are
the loans that are closely related to the oldest type of loan.
Personal loans are quite broad in nature and are quite similar
to the term loans. They are widely divided as secured personal loans
and unsecured personal loans. As lenders are in business, they have
to ensure that they will recover their money. Loan applicants with a
good credit history can easily get a secured or an unsecured loan, based
on their requirement, emergency and compliance.
A secured personal loan is economical if you need a big amount of money
and are ready to use your asset as collateral. On the contrary, an unsecured
personal loan is an excellent choice if you are reluctant or don't own
collateral and need money quickly or for short term. A secured loan
carries low interest rates, flexible repayment terms and simple loan
clauses. On the other hand, an unsecured loan, carries high interest
rates and rigid repayment terms and conditions.
The average approval time required for a secured personal loan is more
as against an unsecured personal loan. This is because here the lender
needs to start by gauging the worth of the pledged collateral, and then
draw the loan terms and conditions. This leads to normal bureaucratic
procedures and delayed approval. But in an unsecured personal loan,
the lender just check's your credit record and your future repayment
ability. This reduces the paperwork and speeds up the sanctioning process.
Secured personal loans have one big danger - collateral forfeiture.
If you do not pay as agreed, the lender can then possess the pledged
collateral. This is not the case with unsecured personal loans. But
it doesn't mean, you can escape without repaying the lender. By taking
recourse to the court of law, the lender can force you to sell off your
assets for repayment. Hence always repay the entire amount in time,
no matter what type you choose. People looking out for extra money urgently,
will find payday loans, a special sub-category of unsecured personal
loans a good option. These loans deposit money into your checking account
within 24 hours or earlier. Normally, the payday loans carry very high
rate of interest of about 30% and you should repay the loan within two
weeks, failing which the interest can go up. If you have bad credit,
even you can get personal loans specially tailored to your condition.
The bad credit personal loans are designed for people with bad
credit record. Even these loans can be either secured or unsecured,
but they will always have much higher interest rates and strict repayment
plan, as against the normal secured and unsecured personal loans.
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