- Secured personal loans
These loans is “secured” requires you to put an asset (called collateral) as security in order to borrow money from lenders. Furthermore, if the borrower don’t repay his loan according to loan terms, the lenders has the right to take hold of the pledged asset to recuperate his loss without going to court. Examples of secured loan include vehicle loans, home mortgages and home equity loans or other any valuable to get the loan. However, secured loans have lower interest rates compared to unsecured loan.
- Unsecured personal loans –
For these type of loans, lenders don’t require any collateral for the debt. Because there’s no underlying asset securing the loan for the lender. However, you still subject to repay it, failure to do so, the lender may take you to the court. The interest rates on unsecured loans are tend to carry higher on average than secured personal loans.
When you’re applying for a personal loan, it may be secured or unsecured, you should always carefully check the following information with your lender.
Personal Loans According to rates
• Fixed rate personal loans
The interest rate charged of the loans still remain fixed and doesn’t fluctuate throughout the fixed rate term of the loan regardless of the economy changed over time. The purpose of fixed interest rate is based on the lender’s assumptions about the average discount rate over the fixed rate period. This allow the borrower budgeting a whole lot easier for their future payment, yet typically it carry high interest rates.
- Variable rate personal loans
The interest rates can vary and change according to a timetable included in loan terms. However, variable rate loans may also carry “caps” that limit how much rates can change at each adjustment period or over the life of a variable rate loan. As the interest rate can fluctuate repayments on this type of loan will go up and down.