Different Uses & Types of Personal Loans
Lending industry in the UK is expanding like anything. More and
more people are taking out loans. Strong economy and rise in
consumerism is making people take out loans and spend more. The
need to take out a loan may arise any time.
Personal loans
offer the most convenient way of raising money. You can
take out a personal loan for any purpose. If you want to buy a
car and you do not have sufficient money for this, you can take
out a personal loan for it. A personal loan can be used to buy a
new or an old car.
You can also take out a personal loan to consolidate your debt.
Debt consolidation becomes a necessity when you are finding it
difficult to meet your debt obligations. A low rate debt
consolidation loan can be used to repay all your high rate
unsecured loans. This will help you to get rid of your debt
obligation.
A personal loan can also be used for home improvement. You need
money for house repairs as well as renovation. Home improvement
includes painting, wall papering, installing heating system and
air conditioning system, adding new bathroom fixtures, building
a new room, etc.
Personal loans can be used for many other purposes such
as to buy a car, to pay for a holiday trip, to pay for college
fees, etc. Personal loans are broadly classified as
secured and unsecured. Secured loans are given against a
security whereas no such security is required in case of
unsecured loans. The rate of interest on secured personal loans
is lower than the rate on unsecured personal loans.
On the basis of mode of repayment, personal loans are
of three types - installment loans, balloon loans and single
payment loans. Installments loans are repaid in the form of
monthly installments. The monthly installments carry both the
principal and the interest elements of a loan amount. In case of
balloon loans, interest is paid at regular intervals and the
principal amount is repaid at the end of the loan period. In
case of single payment loans, the entire principal as well as
its interest is paid at the end of the loan period.
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