CNN Central News & Network–ITDC India Epress/ITDC News Bhopal: Navigating the world of personal loans can be challenging, especially when deciding between secured and unsecured options. Understanding the differences between these two types of loans is crucial to making informed financial decisions.
Most banks and NBFCs in India offer secured and unsecured personal loans, catering to a wide range of customers with different financial requirements. Shriram Finance, one of the leading players in the NBFC landscape, offers competitive interest rates on its personal loan, ensuring customers can access funds when they need them the most without straining their finances.
What Are Personal Loans?
Personal loans are a type of credit that allows individuals to borrow a lump sum of money for various personal expenses, such as home renovations, medical bills, debt consolidation, etc. Borrowers agree to repay the loan in fixed monthly instalments over a set period, usually ranging from one to five years. The interest rate on personal loans typically depends on the financial institution’s policies, borrower’s credit score, income, and overall financial profile.
Secured vs. Unsecured Personal Loans
Based on the requirement of collateral, personal loans can either be secured or unsecured. Loans that are backed by collateral, like a loan against your credit card or an investment like a fixed deposit, are secured personal loans. Unsecured personal loans do not require borrowers to pledge any asset, like their house or any investment.
In the event of a default on a secured personal loan, the lender may take possession of the collateral to recover their loss. Because the risk to the lender is lower, secured loans often come with lower interest rates and higher borrowing limits.
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