Personal loans are taken by the people for any type of purpose. It can be a personal loan for buying a car or home, for buying electrical appliances, to pay off another debt, for expenses or any reason that is related to the borrower personally. This loan is taken in cash mostly because the amounts don’t exceed higher limits and customer has to use the money for his/her personal needs. The personal loans are not secured by any type of assets mostly. There are basically two types of personal loans depending upon the terms and conditions of the contract between the lender and the borrower:

    Secured personal loans
    Unsecured personal loans

Now as the name shows that secured personal loans are secured with some kind of asset of the borrower. You can call it a lien also. Your asset like your home, car, boat or land can be used for getting secured personal loans. If you don’t repay the amount, your asset will be taken by your lender.

Unsecured personal loans are based on your credit worthiness. For example credit cards, payday loans, etc are types of unsecured loans. They have higher interest rate and they are expensive. As the risk involved is greater for the lender that’s why they have high interest rates.

These were the basic types of personal loans. Based on your circumstances, you can apply for a variety of loans for your personal purpose. They are explained as below:

Home equity personal loan is a type of personal loan which is a loan which you can get against your home. If your home has enough worth for specific amount of loan, you can get a personal loan with lower interest rates. The amounts against home equity are larger because risk is less. You can also get long time period to repay the amount. But make sure if you don’t repay the loan, lenders will take away your home.

A home equity line of credit is also a type of personal loan which you can get also against your home. Advantages of this type of personal loans are:

  •     You can get a big amount against your home but interest rate will only be applied on amount you have used
  •     You have a longer time to pay back
  •     Interest rate is lower
  •     You can use money when you want there is no limit of time

Short term personal loans are types of personal loans in which you pay higher interest rates and time period for payment is small. As name is short term loan, you get loans for smaller time and you can say instant loans. This is a secured personal loan so if you don’t repay, you can lose your asset.

Above listed types of personal loans can help you compare the loans and their terms and conditions. Choose wisely while applying for personal loans.