The personal loan industry is one of the biggest ones in the United States. Banks like Citi and Bank of America make billions of dollars every year from these loans. As a result, more companies have entered the industry. Goldman Sachs, a bank known for offering investment advice has recently moved into the sector. There are other start-up companies that have moved into the sector. The most prominent ones are Ally Bank and Lending Club. In this article, we will look at the main types of personal loans.<\/p>\n
Secured Loan<\/strong><\/p>\n
Broadly, there are two main types of loans. These are secured and unsecured loans. A secured loan is a type of loan that has a security behind it. This security is known as a collateral. The role of the security is to safeguard the interests of the lender. It ensures that the borrower pays back the loan. If they don\u2019t, the lender has the freedom of selling the asset to recoup their investments. These collaterals can be assets like a vehicle, a piece of land, or a house. A good example of a secured loan is a mortgage.<\/p>\n
Unsecured Loan<\/strong><\/p>\n
As the name suggests, an unsecured loan is the opposite of a secured loan. It is a loan that has no collateral behind it. The lender extends credit to a borrower and hopes that they will pay it back. They used their judgement on the borrower\u2019s income, cash flow, their past record of paying money, and their credit scores. Unsecured loans are offered by banks, credit unions, and online platforms like Tunaiku Android<\/a> and Tunaiku iOS<\/a>.<\/strong><\/p>\n