Personal loans are the ones, which are acquired due to some personal reasons or desires; these are customized or “tailor-made” loans. Many banks, financial institutions, companies etc. provides personal loans. Like any other type of loan, personal loans are also needed to be paid back along with interest within a specific period. This period is termed as loan term.
Personal loansare broadly classified into two types, the secured personal loans and the unsecured personal loans. The former are those loans that are given against some kind of security, which is usually your personal property like your home or car. This security guarantees for the repayment of loan. In case of non-repayment of the loan, the loan provider has the power to seize the property.
The latter on the other hand does not require any kind of security to avail any type of loan. Now you may ask that why one will go for secured loans rather than unsecured loans. The reason is that there is a difference in the interest rates of both types of loans. The interest rate in case of unsecured loan is much higher than in case of secured loans, thus people prefer secured loans.
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