Personal loans come in handy to meet the emergency expenses and also for buying domestic appliances. This may be used for a holiday trip as well. For those who are able to provide collateral securities such as a house or a car a larger amount is sanctioned as personal loan. The interest for such a secured loan is also less and the repayment time is comfortably long, from five to twenty years.
Personal loans are also sanctioned to people who do not provide any collateral security. These personal loans are called unsecured loans. The sanctioned amount is usually much smaller than a secured loan and the repayment time is much shorter, which is just one to ten years. The main difference is that the interest rate charged for such unsecured personal loans is exorbitantly high, as the lender finds a greater risk in this loan as there are no collateral securities given by the borrower. In case of a default the lender will not be able to recover any thing from the borrower. For people with poor credit score an unsecured personal loan will be the ideal way to fulfill their commitments. The large financial institutions may not lend to such people but smaller lenders offer personal loans to them. At a high rate of interest.