A personal loan is money a person borrows from a bank or other financial institution in an effort to meet financial needs, both short term and long term. The two most common categories of personal loans include secured and unsecured loans. Secured loans require some type of collateral – this might include your home, which you could lose if you default on repayments. Unsecured loans don’t require collateral; however, borrowers are charged a higher interest rate for the risk imposed on the lender.
The term of a personal loan can be just about as short or long as the borrower prefers. There are also no set terms on the amount that can be borrowed – it depends on the type of loan you take out as well as your level of credit. Repayment terms are also flexible and are usually determined by the financial institution you’re working with.
Credit checks typically come standard with personal loans. For this reason, personal loans can be declined if the lender feels the borrower runs a risk of defaulting on the loan.