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Variations in Personal Loans

The Personal loans can fall in any one of both the categories of secured or unsecured. Secured loans are awarded by taking a mortgaged security of movable or immovable asset belonging to the debtor in respect of the amount being borrowed.

In case of a default by the borrower, the security provided is taken into possession by the creditor and disposed off as provided in the mortgage agreement. Thus borrower looses his valued asset towards clearing of the debt amount.

In contrast to the Secured loan, the unsecured loan does not have to its benefit the asset to take possession of and disposing to recover the debt amount. The draw back is this loan to carry over the additional risk of the debtor charges a higher rate of interest.

It is usually a normal practice for the creditor company to assess his debtor regarding his capability to pay the debt amount and debt amount maximum limit has relation to his net income after paying for any debts contracted earlier and their tax liabilities, any defaults in the payment towards existing loans etc. before considering loan application for approval or rejection of the application if it has any disability factor to sanction loan.

Even in spite of all this persons with poor credit rating, can still avail of a loan, because of inter company competition.

There are certain creditors who are not very rigid in their lending norms and process the loan application by taking two additional personal guarantees instead of a secured asset.

Many loans are processed on line and up to certain loan limit they do not follow credit rating of the debtor and rely on the particulars submitted and declarations made to the creditor company and on line agreement to the terms and conditions, which have some hidden clauses coming to the rescue of the creditor companies.

The borrower should pay proper attention to the creditors’ terms of loan. Such short term loans carry a very high rate of interest considering that the repayment is made in a short period and the over all interest earned by the creditor is a small amount although very high in terms of a percentage on the principal amount.

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