A PERSONAL LOAN is perhaps the most common type of loan individuals usually apply for. Banks are the most common financial institutions that provide this kind of financial assistance and those who usually apply are normally direct clients of the bank. More often than not this type of financial loan is unsecured and is deemed to be a high risk investment. It is also referred to as a small bank loan. When applying for personal loans, lending companies would perform strict credit check and verify the income of the borrower. In extreme cases the lender would ask the borrower to show proof that he has at least some properties that is worth at as much as the amount of money he or she is borrowing. Usually, this type of loan is approved or denied within a matter of days.
Higher Rates for Personal Loans
The disadvantage of applying for a personal loan is the fact that you would have to pay a higher interest rate as compared to other types of loan and repayment terms usually do not exceed twenty four months.
Convertible, Fixed Rate, installment & PAYDAY LOAN
Personal loans come in a variety of loan packages. First there is the convertible loan that is normally used for businesses. Convertible loans allow lenders to convert the principal loan amount into equity in the borrower’s business venture. This actually may be worth more than the loan and this is one risk the borrower would have to take. Fixed rate loan is another type of personal loan where the interest charge on the loan is fixed and do not vary. There is also the installment loan where the borrower repays the principal amount plus interest via monthly amortization. Payday loan is a new type of personal loan that is being offered in the market. Also known as cash advance loan, this is easy to avail of. Its accessibility however makes it a very costly aside from the fact that it incurs a very high interest. The loan is usually short term.