The key to this attractiveness is that personal loans are easy to qualify for and they serve a wide range of purposes. With a personal loan you can go on vacations, pay for college, undertake home improvements, consolidate debt, buy a car and more. However, there are different types of Personal Loans and you need to know each type of loan thoroughly before applying because, as any other important financial decision, it may affect your credit for many years to come.

Unsecured Personal Loans

Unsecured Personal loans do not require the borrower to offer collateral in order to secure the loan. This is the main reason why this kind of loan is commonly requested by tenants and generally non-homeowners. The Interest rate, though, tends to be higher due to the risk involved in the transaction. The lender will cover himself from this risk by charging higher interest rates and requesting higher monthly payments. However, they are still a lot cheaper than getting finance by using your credit cards. Unsecured personal loans are not only easily qualified for but also the loan application process is usually a lot faster. If you don’t need a large amount of money, requesting an unsecured personal loan seems to be the smartest choice, you won’t be risking any asset, you’ll get the money faster and you won’t have to pay so much.

Secured Personal Loans

On the other hand, secured personal loans require collateral in order to be approved. The collateral can be any asset of certain value, most commonly a house, apartment or a vehicle. This kind of loan presents a lower interest rate than unsecured loans due to the lower risk involved for the lender. However, the borrower is under the risk of repossession of the asset he used as collateral. Repossession is a legal action that can be exercised by the lender in order to legally claim his money and recover it by selling the asset that the borrower used as collateral.

Where to look for a lender

The best way to find a personal loan lender is to search online. Online lenders usually offer free no obligation applications and quotes so you’ll be able to compare many offers and choose the one that best suits your needs. And you’ll be doing all this research without having to move from your home. There are even sites offering access to many lenders dealing with personal loans. These sites will save you a lot of time and money as you’ll be able to contact many lenders from the same site and let them compete so you’ll get the best deal available.