A loan made for personal, family, or household purposes as opposed to a business loan or a long-term mortgage loan used to finance real estate purchases. Personal Loans can be secured or unsecured loans and are often used for several purposes which include payment for tax bill, tuition fees, debt consolidation, car repairs or other financial emergencies. A personal loan can also be used if the borrower needs additional funds to purchase a car, a yacht or for vacation.
Different types of personal loans?
Personal loans come in two types: the secured and unsecured. Secured personal loans require security which is often in collateral. The collateral can be tangible or intangible possessions. They are also easily available on account of the collateral, which makes the lenders willing to grant the loan. The secured personal loans are cost-effective because their interest rates are lower than unsecured loans. There are also easy options for terms of payments. Having collateral to secure the loan does not give many worries to the lending institutions and banks in the event of nonpayment.
In contrast, unsecured personal loans have strict terms of payment, and the interest rates are higher because the lender’s risks are higher as well. The two bases for its approval are the credit worthiness of the borrower and his capacity to pay. Personal loans are commonly granted to tenants, to those who do not own home properties, and to those who are not in a position to offer any collateral. In case of default in payment, the lender holds nothing to guarantee payment of loan, except, those which are stipulated on the clauses of credit agreement, and legal approaches.
The application process for both secured and unsecured personal loans is fast and easy. In most cases, personal loans do not have hidden charges, application fees, origination fees and closing costs. The borrower’s credit worthiness is given too much weight that the loan approval depends on this sole factor. The minimum amount to be loaned is C$500 and the maximum amount approved can be C$25,000. Before you make the decision on personal loans, it is best to shop around for comparison of rates. Every bank and lending institutions has its own policy and criteria. Choose the one that best fit your needs. If your credit score suffers tremendously, you can take advantage of personal loans to improve it. There are lenders that offer personal loans for bad credit. Such program is designed specifically to end your sleepless nights.