A Personal Loan Can Be a Good Choice

A personal loan is often one of the most expensive loan options available. Most personal loans are not secured with any type of property (car, home, land, etc); instead it is just the guarantee of the individual that secures the loan. This is a high risk for the lender because the borrower has nothing tangible to keep them from defaulting on the loan. The cost comes in the higher interest rate.

At one time all loans were a type of personal loan. It was the word of the borrower that secured the loan. If a person defaulted for any reason he was imprisoned in debtors jail until the debt was paid in full. It is only in modern history that this practice has been abolished. For many of todays borrowers, there is not even shame in being unable to pay a debt.

Because of the trend that the lending industry has seen towards bankruptcy, many companies no longer do any unsecured loans even personal loans have to have some collateral. It the borrowers do not get back on track with repayment, it is likely that the types of personal loans given will continue to decrease. The requirements and guidelines will continue to tighten as well.

A personal loan can have its place in a financial portfolio. If it is secured by existing money (a CD or savings account) then the interest rate will often be lower than many credit cards (the interest drawn on the CD or savings account will also help to offset the costs of the loan). This could be the best option for consolidating those types of loans into one payment. A personal loan can also be great for doing small renovation jobs or home improvement projects.

Its always a good idea to shop around when searching for any loan. Finding a personal loan that has the flexibility and payment parameters you need means the search is even more valuable.

Kathryn Lang is a freelance writer covering the loans industry. She has written various articles on Personal Loan issues and regularly writes on all forms of Loans news.

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