The concept of personal loans does not limit itself to specified uses. The principal amount that usually ranges in between 25,000 to 1,000,000 can be thus used for plethora of purposes. These may include buying an asset, investing in property, family holidays,
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consolidating your running debts and coping with the current financial crisis.
To classify broadly, personal loans can be categorised as secured and unsecured personal Loans. Secured Personal Loans are offered against a security put forth by the borrower. The security termed as collateral may include any valuable item, such as house, car, property, shares, bank accounts and others. In case, the borrower is unable to repay the loan amount, the lender has every right to repossess the security on stake.
The risk associated with secured loans is comparatively lower for the lender because of the presence of security. Thus, you can borrow a large amount of money at a low rate of interest. The involvement of legal issues concerning property makes the processing of secured loans a prolonged affair. Unsecured personal loans are availed without offering any security by the borrower. Due to no security for the lender, these loans have a higher rate of interest in comparison to secured loans. A limited sum of money can be borrowed. Absence of collateral speeds the processing period.
People in need of quick cash and no security to place generally go in for unsecured personal loan. They can be further classified as unsecured debt consolidation loans, unsecured home improvement loans, unsecured holiday loans, and others. Limited documentation and absence of legal formalities like valuation of collateral make the process swift and easy.
So, before you venture into the process of availing personal loans weigh the advantages and disadvantages of both secured and unsecured personal loans. Things like your credit history, availability of security, amount of money needed and others are to be kept in mind.
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