Personal loans are multipurpose loans, i.e., they can be used for any purpose. As the lender is not concerned with the purpose of the loan, the borrower is free to use the funds in any manner he wants.
People avail them: for varied business requirements; to recover from a bad credit situation; for education and career development objectives; to renovate the home; for medical and beauty treatments; to consolidate multiple debts; for new or used car purchase; to cover vacation and holiday season expenses; and for endless wedding expenses.
A Personal loans can be broadly classified into secured and unsecured loan. The basic difference between the two types of loans is the requirement of collateral - a secured personal loan requires collateral, whereas an unsecured personal loan does not.
As the significance of collateral in the loan bazaar is still supreme, a secured loan application receives quick attention. Other advantages of opting for this loan are - high credit limit, competitive low APR, flexible payback terms, and negotiable loan clauses.
An unsecured personal loan comes into the picture when the loan seeker is unable or unwilling to pledge collateral against the loan amount. Other advantages of opting for this loan are - less official formalities, fast loan processing, and no immediate risks in the event of repeated defaults or non-repayment.
The above-mentioned features of secured and unsecured loan types are very attractive. However, they both have their own set of limitations too. The drawbacks of unsecured loans are limited amount, high APR, fixed payback terms, non-negotiable loan clauses.
Two inseparable drawbacks of secured loans are slow approval process (due to time-consuming property evaluation procedure) and collateral seizure (in case of repeated defaults or non-payment).
Though secured personal loans have the largest market share in the UK loan market for obvious reasons, pledging collateral is neither always possible, nor required. Hence, unsecured personal loans are becoming popular, especially over the Internet, for the aforementioned reasons.
About The Author: The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. He has done his masters in business administration and is currently assisting Go-4-UK-Loans as a finance specialist.
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