Features and Types of Loans

A loan refers to an amount borrowed for a stipulated amount of time from a person or institution. A point to be noted is that besides money, any material object may be lent. The amount borrowed is called the principal but the repayment amount will include interest charges also. The repayment structure may be in the form of monthly installments. Partial payments made annually are also accepted. Normally, a contract is signed between the two parties engaging in the loan, stating the restrictions and obligations to be met. If the contract is legal, defaulters are answerable before a court of law.

Loans are available from various sources like banks, private and government financial institutions, co-operative societies’ etc. With the influx of the internet, obtaining a loan is no more a tedious or time consuming job. The options before you are numerous and all processing can be done online. There are different types of loans to suit different needs. Compare loans offered by different lenders before you make your decision. You need to just logon to the net and find a website that enables such comparison. By filling in all the necessary details in a single application form online you can get a detailed report on loans offered by various lenders, complete with repayment structure, interest rates charged etc.

Some loans require collateral or security to get approved whereas there are others that are advanced without mush formality. To go into detail of the characteristics of secured loans and unsecured loans:

Secured Loans

Tangible assets, documents related to property rights, vehicle registration papers etc. are required to be lodged with the lender or lending institution as collateral for approval of a loan. The lender sends a team to appraise the value of the asset before he accepts it as security. The objective is here is that in case the borrower defaults a series of payments, it is the right of the lender to take possession of the asset. One advantage with these loans is that the interest rates tend to be lower.

Unsecured Loans

Here there is no need for any type of collateral or security for loan approval. Most of the personal loans provided are of this nature. The trouble is in finding them because they are not as readily available as secured loans. The main criterion here is the borrower’s credit history. Only those with a firm financial background will be approved. In case of default, usually a lawsuit will be imposed upon the borrower or he will be hounded by collection agents until the amount is paid. Interest rates are far higher here.

In case you’re opting for a loan from private online lenders, run a check on their authenticity before you liaise with them. An example of fraudulent lenders is those who offer Advance Fee loans. These people use various tricks to convince borrowers to send a certain sum of money to them following which they promise to advance a loan. However, once they get hold of the money, they disappear and the client is left high and dry.