What are Secured and Unsecured Personal Loans?

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We all need money to fulfil our basic needs, and there are times when we may face a shortage of money. Or it may happen that we need to buy something which is really necessary but we do not have enough money to buy it like a house or a car. Then for these purposes, several banks provide a facility of Personal Loans. These types of loans can be received very easily, as they do not require any long process to complete. For this kind of loans, banks do not ask for the reason or clearance. So these loans are often named as Unsecured Personal loans.

Unsecured Loans

If the bank gives you a free hand in the documentation and does not do any type of investigation regarding the loans, then these loans will be unsecured for the bank, and the only way they can expect their money back is by trusting you. Unsecured Personal loans are often given in short amount and that money can be used for smaller purposes. Such as to meet some common needs, in case if you run out of money. Everything that bank has got as the security by your side is just your signatures and copy of some common documents. It is obvious that bank must have some advantage in this as well if they are taking some high risk, and that advantage is the high-interest rate. Which you have to pay back with the original amount of money which you have borrowed.

Secured Loans

These type of loans are also given with the quick process, but as a large amount of money is given in the secured personal loans. So it is obvious that bank will require some security from your side. These loans are often given for the purchase of a house or a car. So the security is kept in the form of Gold, Land, Boat or any other valuable stuff which can provide the guarantee of the money which you have to borrow from the bank. Personal loans are often given on the short term basis. So it comes in a disadvantage as well.