A personal loan's chief attribute is perhaps its flexibility. Though a lender requires you to mention the purpose for which you are availing the personal loan, you are not obliged to use it for the same purpose. You can put it to a variety of uses like:
• Consolidating your past debts
• Renovating your house (if you are not satisfied with the present looks of your house)
• Paying your holiday bills
• Meeting medical expenditure
• Buying your dream car
• Financing the studies of your child, and
• Pay for an extravagant wedding in the family
A personal loan can be either secured or unsecured. In the case of a secured loan, you have to offer your house or any other piece of property as collateral. The collateral will make the loan sanctioning a no-risk job for the lender. As he will face almost no risk, you will get lower interest rates and longer repayment term. A secured personal loan, however, will take a little longer than an unsecured loan to be delivered to you. The prospect of losing your collateral in the event of non-payment of the loan will also be there in front of you.
An unsecured personal loan requires no collateral to be furnished. This makes the loan a high-risk enterprise for the lender. A risk for the lender means the loan will have strict terms and conditions. The interest rate will be high and the repayment term will be short. Unsecured personal loans, however, reach the consumer very fast as there is no collateral to be assessed and consequently very little paperwork.
Personal loans are available to people with bad credit record (usually a reflection of missed payments, arrears, defaults, county court judgements, and bankruptcy) also. It is desirable, however, that people with bad credit record apply for a secured personal loan.
Since there are too many rapacious lenders in the UK loan market, it will be better if you compare the rates of the different online lender before applying for a personal loan. This will make you job easier.
The author is a finance expert and is currently working with Shakespeare Finance Ltd.
