A personal loan is a home equity loan where the borrower is required to put up collateral (typically the borrower’s home). An unsecured personal loan, otherwise known as a home equity line of credit, is usually paid off in small monthly installments over a long period of time. Because it is not backed by collateral, an unsecured personal loan can also be easier to get than secured loans. In general, secured personal loans are offered at different interest rates. Lenders usually offer unsecured loans between five thousand dollars and fifty thousand dollars – or more than $100,000 for better-than-average credit.
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Personal loans come in two main forms – secured and unsecured. A secured personal loan requires the borrower to place down collateral. The collateral can either be your house, a car, a boat, or an item like jewelry or collectible books. A lender will typically require some kind of collateral, so he can protect himself should you default on the loan. If you default on a secured loan, the lender will repossess the collateral.
Unsecured personal loans do not require collateral. As the name suggests, these are given out for personal reasons. For example, you may borrow money to go on vacation. Or perhaps you want to pay for child care. The lender will consider these things when approving or denying a loan application. Most lenders will use credit checks to determine eligibility for a loan, although some will require applicants to fill out a personal information form for personal financial information such as the credit history and employment history.