A personal loan is a credit granted in the form of cash for individual use such as medical, education or household. From time to time, you may require a financial boost for you to meet needs that your available finances cannot. Personal loans are available in different forms. Collateralize and unsecured lines are the major types of personal loans.
To be eligible for a secured loan, you need to have a guarantee. The guarantee is an asset that meets the value of the money given in credit. Lenders use the collateral as security for your loan. In case the borrower is unable to clear the loan, the collateral is sold to recover the money given as credit. There are several types of secured loans.
Home equity loan is one type of secured personal loan. A home equity loan is collateralize using the wealth you have at home. The assets are also referred to as home equity. Home equity is reached by subtracting your home’s value from your loan.
The other type of collateralize personal loan is second mortgage loan. The second mortgage loan is a type of loan, that allows you to borrow credit from lenders against your home equity. The difference between second mortgage and home equity loan is that the money is given to you in a lump sum once you qualify.
The third type of secured personal loans are car title loans. Loans that you borrow using your vehicle as collateral is called a car title loan. Borrowers give the logbook of their car and in turn receive the agreed amount of money. The lenders will put your car on sale if you do not repay your loan within the agreed period.
The other major category of personal loans are unsecured loans. Unsecured loans allow you to borrow credit from lenders without collateral. Another name for unsecured loans is signature loans. Secured loans come in different types.
The first type of unsecured loan is a revolving line of credit. A credit limit is all you need to qualify for a revolving line of credit loan. Your credit limit guides the lender to determine how much money they should give you a loan. You will increase your credit limit if you are punctual in repaying the loans you have borrowed.
The second type of unsecured loan is fixed-interest installment loans. The loan type lets a borrower apply for credit then repay in installments over a specified duration. The principal and the interest imposed on the loan are accounted for as the payment and pay-back period is being set.
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