WHAT IS A PERSONAL LOAN?
A Personal loan is mainly an unsecured loan. Therefore, there is no need to deposit any security or collateral to the bank or the moneylender by unsecured loan. Therefore, the rate of interest is slightly higher in the case of a personal loan as compared to the other secured loans.
A personal loan has a lot of features that make it different and unique from the other loans. The money is disbursed in no time in case of a personal loan after accepting the application of a personal loan. The amount of the EMIs can be calculated with the help of an EMI Calculator Personal Loan.
A PERSONAL LOAN IS A SECURED LOAN OR NOT?
There are mainly two main types of personal loans. A personal loan can be a secured loan, or it can be an unsecured loan too.
SECURED LOAN- A personal loan can be a secured loan. By secured loan, the borrower has to deposit some collateral or security to the bank or the moneylender. In simple words, the money lenders or the banks sanction a personal loan when the borrower pledges an asset as a security. For instance, a person can pledge his plot, gold, house, vehicle, fixed deposits, or securities as collateral. Also, if there is a default in the case of a secured personal loan, the moneylender can seize the collateral and liquidate it to recover the loss or the borrower's debt. The creditor has all the legal rights to do that. There are different types of secured loans such as gold loans, mortgage loans, vehicle loans, loans against fixed deposits, etc.
UNSECURED LOAN- On the other hand, a personal loan can also be an unsecured loan. An unsecured loan means that there is no need to pledge any collateral as a security to the bank or the moneylender. In this type of loan, the money lenders mainly scrutinize the borrower's credit score and check their repayment history. The applicants also need to have a credit score of 750 or above to avail of a personal loan easily. In case of default in a personal loan that is unsecured, the credit score and the borrower's credit report will be affected.
INTEREST RATES OF SECURED V. UNSECURED PERSONAL LOANS: -
Unsecured personal loans usually have a higher rate of interest than the secured personal loans. This is because money lenders often see unsecured personal loans as riskier. Without the security or the collateral, the moneylender may worry about whether the borrower will be able to compensate the loan or not. Therefore, an unsecured loan has a greater burden or risk, which is why the interest rate is higher in this situation. However, a secured personal loan has a lower rate of interest. Therefore, the SBI Personal Loan Interest Rate is lower as compared to the other loans.
SOURCES FOR THE SECURED AND UNSECURED PERSONAL LOANS: -
There are mainly three types of lenders that offer personal loans, which are as follows:
Banks
Credit Unions
Online loan companies
The money lenders can vary with the eligibility criteria and the rate of interest. Most banks often prioritize those customers who have higher credit scores and good credit history. On the other hand, credit unions may be less stringent in their loan-granting requirements and may also provide cheaper interest rates. A person can also avail of a personal loan from an online money lender. Online money lenders may offer lower interest rates for applicants with a good credit history and a high credit score. This process is also convenient because the whole process of the loan is online.
CONCLUSION: -
A personal loan can be a secured loan or an unsecured loan. If you want to get the best for you, you need to research and compare different loans offered by different banks and then select the one, which is the most suitable for you.
Comments