Personal loans, as the name suggests, are personal. They can be used for any purpose. These loans are broadly categorised into two categories. They are secured personal loans and unsecured personal loans.
Secured personal loans are generally availed by the homeowner, as the loan requires the borrower to put up collateral in order to get the loan. The collateral can be anything of value, from a home to a car or, in some cases, even jewellery. The value of the collateral determines the loan amount given out to the borrower.
There are several advantages attached with secured personal loans. One of the foremost benefits is the loan amount one can borrow with collateral in place. The standard limit is £75,000. Though, this figure can be raised if the collateral is of greater value. The longer repayment term (sometimes 30 years) also facilitates the borrower to plan his finances accordingly. The one major disadvantage with a secured personal loan is that the lender, in case of a repayment default, can repossess the collateral.
Unsecured personal loans are different in that the amount one can borrow with these loans is limited, up to £25,000. However, there are advantages too. One obvious plus with this loan is that there is no need for the borrower to put up collateral. Another advantage with unsecured personal loans is that there is no tedious documentation process that accompanies the secured variety. Thus, these loans are processed relatively faster.
There are several avenues from which to get personal loans. There are banks and building societies, private lenders and the Internet. The first two of these lenders have been established since long in the UK financial market; they have managed to establish some goodwill with the borrowing market. The private lenders are a much later addition. They are more a product of the diversifying needs of the borrowers. However, the Internet provides the fastest and most convenient route to availing personal loans.