A loan is a debt that can be taken from banks to meet your current financial needs and then repaying the principal amount along with an interest to the bank later. Loans are very essential and are also easily available. Different banks provide loans to their customers for various needs. It can be any personal need for buying a car, or a home loan etc. Even if you need to set up capital for starting a business you can arrange for loans from the banks.
A personal loan is usually a short term loan unlike a mortgage loan which spans for ten to thirty years. These are generally lesser than five years. You can use this to finance your new vehicle or your new home, consolidating debt and even to finance your vacation. The borrowed amount is paid back in installments which may or may not be on a regular basis. This service is provided at a cost which depends upon the amount borrowed and the duration of the loan.
This can be classified into two major groups- secured loans and unsecured loans
Secured loans are those in which the borrower has to mortgage an asset or property as collateral against the amount borrowed. In case of any fraudulent activities or default in repayment, the bank can take over the asset.
Unsecured loans do not require any mortgage against the sum borrowed. This service is provided usually with a much higher rate of interest because of the higher risk. In case of defaulting the lender can take legal actions.
Whatever loan you take you must be thorough with the terms and conditions. Make sure of the interest rates and duration. One type of loan that you should look into (at times unavoidable) is payday loans. These are loans borrowed with the guarantee of your next paycheck. They have extremely high annual percentage rates.