Personal loan

Loans used for personal purposes like financing holidays, repaying debts, and reimbursing the cost incurred in carrying repairs in home are called personal loans. Personal loans may be distinguished from the business or commercial loans that differ both in scope and amount.

There are basically two types of personal loans. The personal loans that are backed by collateral to reduce the risk involved in a loan are known as secured loans. The other type of personal loan where collateral is unnecessary is unsecured loan.

Personal loans allow borrowers to draw the amount in the manner that they decide. People draw the entire amount to make investments like in cars and other vehicles purchase. Another method of drawing amount of personal loans is through a line of credit that gives the borrowers access to resources as and when they need it.

The borrower is offered the freedom to decide the repayment schedule of the personal loans. The repayments are normally due every month. Some borrowers also make the repayments quarterly.

The amount of repayment depends on the total amount drawn as personal loan, the term of repayment, collateral offered, rate of interest, and method of payment chosen.

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