When a loan is described as a personal loan, it is simply indicating that the loan is being taken out for personal use. Whether the money be for home improvements, a new car, a new kitchen, a holiday or whatever, the loan is pertinent only to whatever personal use the borrower decides upon hence the term personal loans. The phrase, personal loans, also sets them apart from business loans, or car finance.
The simplest variant of personal loan is the unsecured loan. These are usually acquired from a high street bank or other lending institution. Unsecured loans, as the name suggests, require no collateral or security to be put down. As the lender has no security to fall back on, lenders tend to view unsecured loans as a high risk and because of this, they tend to only be for relatively small amounts, usually under £15,000. Personal loans often attract higher interest rates than their counterpart, the secured loan.
A secured personal loan requires that the borrow places collateral as security for the money, hence the term ‘secured loans‘. This security may be called upon should the borrower default on the loan. Because of the security involved, there is less risk to the lender so loan amounts can be much higher than unsecured loans, often reaching as much as £100,000. The interest rates on secured loans can also be more attractive as well.
Secured or unsecured, having the cash upfront when making a large purchase can put you in a good bargaining position. It is almost always a much cheaper option than using any finance offered by the vendorof whatever it is that you intend to purchase.
No Comments Yet
Be the first to comment.