Cheap Personal Loans

The Three Types of Loan

9 October, 2011

Cash advances are a plausible alternative considered by lots of people to get through hard pressed financial circumstances. If you are thinking of borrowing money for some reason, it will be good to know that there are certain types of payday loans, since knowing so helps in choosing the right type for a specific situation.

There are three basic types of loans. The first one is the secured type, and in this kind of arrangement, the borrower provides collateral, a property of a car for example, in order to be granted with the credit. A good example of this is mortgage, which is usually meant for purchasing housing. Here, the financial institution that lent the money is secured by a right to the title of the house bought until the mortgage is fully paid. In the event that the borrower fails to pay the loan, the institution can legally seize the house and resell it to regain the sum lent.

The second type is the unsecured, and as indicated by the name, transactions under this heading are not protected by any asset. Examples of the unsecured type include credit card debit, bank overdrafts, corporate bonds, credit facilities, and personal credits, and just like any loaning proceeding, they are tied with interest.

However, interest rates for these kinds are not fixed; the lender has the liberty of setting the rate, and more often than not, this is not controlled by any law. The third and the last type is the demand. Demand borrowings or bonds are uncharacteristic in the sense that there are no fixed repayment dates and interest rates change in accordance with the prime rate. They are also for short terms, and can either be secured or unsecured.

Again, loans can be secured, unsecured, or demand. Depending on your current financial status and the amount that you need, you can make one of those types work for you.

Personal Loan

by Admin

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