Who does not need a helping hand from time to time? Especially when it comes to cash. And, since there is no such thing as a money tree, a personal loan could be the way for a bail out, or to addressing an important cash need.
Whether it is because of these economically uncertain times, or because consumers are just looking for a little bit more freedom, personal loans have increased in popularity. The best thing about them, unlike a home improvement loan for instance, is that the borrower can use the cash anyway he or she sees fit.
Type One: The Secured Personal Loan
A secured personal loan is exactly what the name implies. The borrower offers the lender title to real property, collateral, should he or she default. This real property or collateral usually takes the form of real estate, such as a home, or other valuable assets, such as a late model vehicle or an antique classic car. Depending on the requirements of the lender, property could even be a valuable art collection or a collection of antique silver service tea sets.
If the borrower is looking for a loan from $10,000 to a $100,000, the value of the collateral offered will have to be in the amount of the loan or greater. Any borrower using collateral to secure the loan should realize what they are gambling. Secured loans tend to have lower interest rates, lower fees, and more comfortable repayment terms than unsecured loans.
For whatever reason, should the borrower not be able to pull off repayments as specified in the personal loan contract, the lender has the legal right to seize the collateral and sell it to satisfy the terms of the loan. This could be a hefty price to pay if a home that is bonded as collateral has been in the family for generations.
Type Two: The Unsecured Personal Loan
Lenders sometimes agree to lend folks money without requiring any collateral posted as security on a loan. The interest rates and accompanying fees on these loans can be rather hefty. As some compensation for the higher cost, these loans require less processing time, so cash can be in the bank account of the borrower much more quickly.
Also, no personal property or treasure is on the line should the borrower default. Usually. If the loan is substantial and the borrower defaults, lawsuits could ensue that could attach personal property if the courts agreed upon the responsibility of default.
With either type of personal loan, lenders generally want to see a good debt to income ratio. They like to see steady employment with a salary that indicates a good amount of discretionary income. They also like to see decent credit ratings.
Alternatives to Secured and Unsecured Personal Loans
If the costs mentioned above are too dear for you risk taking out a personal loan, there are alternatives. The loan amounts may not be quite as large, the interest and fees may be rather high, the repayment terms may not be as accommodating, but lenders exist who are interested in providing unsecured loans to folks with bad credit. A good place to start your search for such lenders would be to go online and check out the opportunities there.