Credits taken for general purposes are called personal loans. The specificity of such kind of borrowing money is that it is provided regardless of the intention a person is going to spend it on.
Getting a personal loan may be a serious challenge as an applicant has to meet a list of requirements to be allowed to get the needed funds. The basic demands may vary from company to company. Yet, the most common are:
Personal loans may be either secured or unsecured. Let’s dive into the details of both for you to be able to decide which one is best for you.
All the troubles and strict requirements concerning the application for personal loans are linked to the fact that they are usually unsecured. What does it mean? It means that the borrower doesn’t place any assets as collateral. Hence, if he or she fails to fulfill his obligations to the creditor, the latter can’t seize anything automatically. So, the company has no guarantee that its funds will be paid back.
Nevertheless, there are some other ways the lender can get his money back from the unsecured loan. To hire a collection agency or to turn to the court are only some of them.
This kind of credits seems to be beneficial for both parties. But is it really so? Those who want to borrow the funds can count on a lower annual percentage rate if they provide collateral. At the same time, the lending companies can get the guarantee that their funds will be returned in case a borrower fails to pay his personal loan bills.
Be attentive when reading through the personal secured loan contract as you may be charged additional 1%-8% of origination fee. Besides, your lending company may require you to get additional insurance for the property you place as a pledge.