A personal loan is something that is authorized to the borrower without making use of any collateral. In personal loans, individuals agree to pay and that person’s credit history plays a crucial role rather than the asset that is pledged. This loan is granted for personal use and develops consumer credit. Generally it is not secured in nature and depends on the ability of borrowers to pay. The kinds of personal loans given are based on the requirements of the borrower’s intention of loan, how much money needed and duration of repayment. Some of such loans are secured as well by some type of collateral security that may include a house, car or jewelry only if the person fails to repay on time.
A borrower agrees to provide some assets as part of collateral security in secured loans which makes it a secured debt. In case if the borrower is unable to repay the loan amount, the person who lends loan has all the rights to take ownership of the asses that has been pledged as part of collateral security. By providing loans through security the creditor is safe from important financial danger as he has right to take ownership of the pledged asset. The creditor can provide loans at appealing interest rates and also repayment times.
Loan for students has been designed to assist students in paying their university fees, books, tuition fees, higher education fees and other expenses. This loan is different than other kinds of loans because of the low interest rates and convenient repayment terms. Interest rate and repayment on principal amount is put off until the student is graduated from the school or college. Lender can also offer an option of loan extension which includes extended period for repayment.
Unsecured loans are something that are given to the borrower by the lender only on the creditworthiness of the borrower and there is no collateral security involved in this type of loan. Lender should have the complete knowledge about the credit history of the borrower as is under a huge financial risk. If the situation of bankruptcy occurs, creditors will not have any kind of claim over the assets of borrower.