Types of Personal Loans

Types of Personal Loans

Fixed Rate Personal Loans vs Variable RatePersonal Loans

The different types of personal loan, with regards to the flexibility of the interest rate, are a fixed rate personal loan and a variable rate personal loan. A fixed rate personal loan is a type of personal loan that involves a set interest rate for the duration of the loan. In a fixed rate personal loan, the interest rate is unaffected by the fluctuations in the market prices and the movements in the economic index. A variable rate personal loan, as the name suggests, involves an adjustable interest rate. The interest rate in this type of personal loan is dependent on the market prices and the economic index. If the economy is doing well, the interest rate decreases but if the economy is doing poorly, the interest rate increases.

Secured Personal Loans vs Unsecured Personal Loans

When it comes to the presence or the absence of a collateral, the two types of personal loan are a secured personal loan and an unsecured personal loan. A secured personal loan involves the pledging of an asset that will serve as the loan collateral. Assets may be anything from a house, a car, a property, or a boat. In the event of a default, which means that the debtor fails to meet his financial obligations to the lender, the ownership of the collateral will be transferred from the debtor to the lender. Unlike a secured personal loan, an unsecured personal loan doesn't involve the pledging of a collateral.