Sunday, January 20, 2008

Personal loans – finance for the common man

By Bernard

There are two types of personal loans in the market today: unsecured personal loans and secured personal loans. The secured variety requires collateral from the borrower; unsecured loans do not.

Personal loans can be segregated into two parts: secured personal loans and unsecured personal loans.

personal-loan.html">Secured personal loans can be procured by putting an asset as collateral against the loan amount.

personal-loan.html">Unsecured personal loans require no collateral from the borrower's side in order to be availed. They are perhaps the more common and widely accepted of the two loans, as they cater to both homeowners and tenants. Homeowners can avail these loans if they feel that furnishing collateral is too big a risk. For tenants, unsecured personal loans are the only viable choice.

Both these loans come with their set of benefits and disadvantages. The biggest advantage with a secured loan is that one can borrow a big amount with this loan. The range starts from ₤25000 and goes up to ₤250000. In fact, in come cases, the borrower can get up to 125% of the equity's value. The repayment term can stretch up to 25 years, and the interest rates offered are relatively lower than what they get for unsecured loans. The one disadvantage with this loan type is that the collateral can be repossessed in case of a default in the repayment.

The biggest advantage with unsecured personal loans is, as mentioned before, there is no need for the borrower to put up collateral in order to get the loan amount. In case of a repayment default, the loan taker has no collateral to lose. He can pay back the instalments in an organised and tensionless manner. Another advantage with this loan is that it meets short-term and small monetary requirements. Unsecured loans range from ₤500 to ₤25000. The repayment term can be up to ten years. However, there is a disadvantage in that the lender tends to hike up the interest rates with collateral absent.

Personal loans can be availed from different sources, like private lenders, traditional banks, building societies and the much loved and used online option.

To get the best loans, one should undertake adequate research. The best loans are often a product of good comparison analyses.

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