1. Unsecured Personal Loans do not require any collateral or other conditions tying the loan to personal assets or property. These types of Personal Loans are typically reserved for the most qualified borrowers. Highly qualified individuals have sufficient credit history to convince lenders that they are not only capable of making payments but can also demonstrate the intention of repaying the entire Personal Loan. Acceptable credit history may include previous loans, mortgages, and auto loans. Credit cards and other revolving lines of credit may also be considered when lenders are determining whether or not to extend an approval for a new Personal Loan. Certain other criteria may also be suggested by the borrower or the lender, although both parties must agree before a loan contract is settled.
2. Secured Personal Loans are quite a different matter. These types of personal loans are generally extended to less qualified borrowers. There are several independent variables that can impact a consumer credit score, and many of these factors will also determine the character of the borrower in terms of credit risk. Individuals who have fallen behind on payments in the past or who have had accounts placed in collection status are less likely to be approved for an unsecured loan. Likewise, individuals who are rebuilding credit after a bankruptcy or other financial hardship may not be eligible for traditional Personal Loans. Borrowers who have no previous installment or revolving credit accounts reflected on their consumer credit report may also have a difficult time being approved for a Personal Loan. To deal with these situations, lenders offer Secured Personal Loans. A Secured Personal Loan is approved based on the borrower’s ability to post a security interest in an item of comparable value to the lender for the term of the loan.
