Types of Personal Loans

There may come a moment in one's life when one needs to borrow money from a bank to address a certain demand or scenario.

When it comes to personal financing, there are a variety of options for people who want to choose a loan based on their needs and repayment capacity. If you want to buy your dream car then you can also apply for ‘mini car loans’ online (also known as kleinkredite in the German language).

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A personal loan is a sort of credit offered by financial institutions that can be used for a variety of purposes. These days, personal can be obtained from:

a) Banks

b) Credit unions

c) Loan companies at brick and mortar places or online

These loans can be grouped into two categories which include;

1. Secured Personal Loans

The secured personal loans require collateral backing. In most cases, the collateral provided is such items as:

a) A home

b) A boat

c) A car

d) Other financial assets

In the scenarios where borrowers fail to reimburse the loan amount to the financial institutions, it results in the repossession of these assets and the borrowers lose them to foreclosure.

2. Unsecured Personal Loans

An unsecured loan, on the other hand, does not require any security and is based on the borrower's creditworthiness. However, because of the risks involved, it has a higher interest rate. In the event that compensation is not forthcoming, the lender or financial institution may pursue legal action.