Personal loans are loans made to individuals for personal reasons, some of which include purchasing an automobile or paying off other debts. These loans are not made to businesses or corporations and are not intended to be used for commercial purposes. Personal loans fall into two general categories: Secured and Unsecured.
Secured loans are loans with collateral. The collateral is usually a personal residence, an automobile, motorcycle, recreational vehicle or a deposit account (share loan).
Unsecured loans are loans made with no collateral. The only guarantee of repayment is the borrower’s promise, which usually makes the interest rate higher than the rate charged on Secured Loans. The two types of Unsecured Loans are Fixed Term Loans and Lines of Credit.