Types of Personal Loan
Not all personal loan products are created equal. Each loan is specifically tailored for a certain purpose, allowing users to maximize the loan they applied for. However, not every loan applicant is aware that there are different types of loans on the market, which makes them miss all the advantages of other types of personal loan available. Thinking of getting a personal loan for instant cash? Read the following loan types to know which personal loan suits your interest best.
Major types of Personal Loan
Generally, there are two major types of personal loan available. Unsecured loans, which are more common among personal loan products, are loans that do not require borrowers to put up collateral. If a borrower defaults in his unsecured loans, lenders will have little recourse in terms of recovering the money from the borrower. This is the reason why most unsecured personal loans have higher interests as compared to loans with collateral, since there are higher risks involved in lending without any form of security.
Meanwhile, secured loans are types of loans that require some sort of payment security on behalf of the borrower. In an event that the borrower defaults, the lender will take the asset used as collateral and use it as means to recover the amount loaned. With the presence of collateral, the risk of nonpayment is lower which translates in turn to lower interests.
There are different types of secured and unsecured personal loans available on the market, with each loan product having a unique advantage over other types. Here are some of the types of personal loans available.
Types of Secured loan
Using your deposit account as a form of collateral for secured loans, you can opt for personal loan products with lower interest rates and better payment terms. In an event of nonpayment, the bank will use the savings account to compensate for the payments missed. With loans secured by deposit accounts, the bank can automatically debit your payment from your account for convenient payment.
Secured loan by property
There are personal loan products on the market that allow borrowers to use their properties as collateral. With the use of assets such as real estate properties and vehicles, borrowers can get better personal loan rates.
Secured by remittance
Tailored specifically for overseas Filipino workers, personal loans that use the OFW’s remittance as form of collateral. In this type of personal loan, the remittance will be forwarded to the bank, which in turn will automatically deduct the payments from the amount sent to the bank. The beneficiaries of the remittance then get the amount sent by the borrower minus the monthly payment.
Common among companies in partnership with banking institutions, employees can file for personal loans that can be tied with the borrower’s salary. In this system, the monthly repayment of the loan will be automatically deducted by the company from the employee’s salary.
Types of Unsecured loan
Standard unsecured loan
The most common type of personal loan offered by banking institutions, standard unsecured loans come in different payment terms between 6 to 30 months. Since these loans are unsecured, the interest rates tend to be higher than secured loan types.
Unsecured loan with revolving credit line
In this type of personal loan, the borrower can take out a certain amount of loan every month, which solely depends on the cash needs of the borrower. The borrower will pay a certain amount as commitment fee and the bank will then set a maximum loanable amount for the borrow.
Unsecured loan with checkbook
Some banks, upon request, will provide checkbooks for personal loan applicants who wish to have a checking account. Depending on the amount of the loan, checkbooks may come in free or a small fee.
Check out how much your cash loan could cost you with our Personal loan calculator