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What Are the Common Types of Personal Loans

A lot of different personal loans meant for different uses and needs are now being offered by banks. There are home loans, advanced loans, auto loans and emergency loans. However, there are three general types which are even the most often availed by clients.

Unlike other types which require particular documents matching specific purposes (home loans, for example, need corresponding appraisal in worth of the specified house and lot), these three types of unsecured loans cover a wider scope of generic purposes which mean less scrutiny upon credit investigation.

1. Secured Personal Loan This type of loan offers security on the part of the lender. This really is availed as a swap of collateral, for example vehicles like cars, boats or motorcycles, and properties like house and land. Banks require borrower to prepare property titles that will stay with the lending company until the loan amount pays off.

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Although many documents are required, it is still simpler to process as not one other investigations is going to be done. The transaction could be finalized to as fast as eventually. If you are targeting smaller rate of interest, than the best suits you. Aside from using a higher borrowing limitation, banks are also more amenable when processing this loan as they may give more flexible payment scheme, lower monthly due and much more perks, like free services and much more lenient conditions.

Around the downside, as your collateral is being kept by the lending institution, the risk of losing your property is very high particularly if the signed contract is not met.

2. Unsecured Personal Loan This kind of loan doesn't rely on collateral but on a good credit score rating and ability to pay. However, this often requires a co-signer or co-maker to back-up the borrower. Only smaller amount can also be allowed by the bank to match the potential risks involved. Flexibility in payment scheme is not as likely to be awarded.

For borrowers who are less confident on their payment capabilities, this is the perfect choice.

3. Line of Credit This type of personal bank loan is actually what most credit card issuers and banks do. They allow their customers to make use of credit lines as much as the agreed limit then the customers just purchase them according to the signed terms. Once paid, the procedure can begin all over again with increasing borrowing limit every time prior dues are settled. However, most credit card issuers do not allow conversion of lines of credit to cash.