Personal loan is a type of loan, which is borrowed to meet the personal, household or family needs. These loans are different from business loans. Personal loans are given for amounts less than $5000. These loans are generally unsecured in the sense that a guarantor or a co-signer is not always mandatory while taking the loan. When these loans are secured, they are secured against property other than real estates.
The ability of repayment of the borrower and his integrity are the deciding factors while issuing an unsecured personal loan. Borrowers need to repay the principal and interests associated with personal loans and this is how these loans are amortized over a fixed period. The reasons for taking personal loans are the following:
Pay for education
Pay for vacation
Debt consolidation
Pay medical bills
Purchasing durable goods
The definition of personal loan states that this loan is issued in order to meet the needs for consumer credit. This loan is given on the basis of the credit history, debt situation and income history of the borrower. The personal loans are not backed by any collateral. The institutions providing personal loans are banks, financial service providers and building societies. Usually, the maximum amount that can be obtained as personal loans is $15,000 for a period ranging between six months to ten years. The interest rates of personal loans vary from 8% to 20% and the interest rate gets lowered with increased amount of borrowing.
Some of the well-known personal loan providers are listed below:
