Finance can be a rather daunting subject to talk about. Everything seems to be needlessly complicated. It doesn’t help its case of being any easier when personal loans are involved. The biggest trouble of it all is that we experience finance and personal loans every day, and it slips right under our noses. So what exactly are personal loans?

Personal loans are a type of debt that serves a regular person’s financial needs. In layman’s terms, debt means money that is borrowed from some entity—whether it be the bank, from another person, or a financial institution. It seems easy enough, but when we go down to the nitty-gritty, there’s a learning curve to be had. In addition, many personal loans cater to different and specific types of people with varying financial situations. As a result, some types of personal loans may not be the best to take for you instead of the next person. That is why we will go over in pronounced detail the different types of loans that are fit for you and what they are all about.


Consider your risk appetite and your attitude towards paying high interests before committing to one particular loan. This will save you a lot of time and long sessions of explanations from a credit loan officer. Also, it’s best to consider the flexibility in repayment and the minimum amount of the debt to be availed. Going in completely blind to the information can cloud your judgment and force you to make rash decisions that will only worsen your financial situation. So let’s take a quick recap of the basic principles of the nature of loans:

Interest and Interest Rates

Interest is the money paid to loan facilities on the premise of borrowing money. So through interest, banks and institutions make money. Usually, how it’s computed is you take a percentage or a rate and take that to the general principal—the actual sum borrowed—and amortize according to the term.

Loan Term

The loan term is basically how long you should be able to pay the debt in full and how you’ll be paying them—every month, year, etc. Generally, the term can be arranged so that you can pay monthly with interest, semiannually, quarterly, or yearly. But, of course, it all depends on both parties’ agreed terms.


This means that the loan term is decreasing gradually after payments are made to arrive at full recoupment by the creditor.


The fact is companies find a way to make their loan products more attractive to willing consumers, which is why the variation of many loans will unrealistically drag on this article for too long. Therefore, we’re only going to cover the most helpful and most common types of loans you can avail of as soon as today.


An unsecured loan is a debt that doesn’t require any collateral for the debtor to acquire. Collateral means an asset of yours that can be used as a waiver should you not pay the loan in full for whatever reason. The creditor will immediately take the collateral without notice.

With excellent credit scores, you can consider this as no collateral is backed from the agreement. If you want an easy entry and hates the idea of mortgaging your house or car in fear of losing them, then this is for you.


Secured loans are the complete opposites to the former. They are backed by collateral and are riskier for the borrower. Therefore, it may be an unwise move to go for a secured loan, but if you have less likelihood of scoring a suitable credit, and you don’t mind collaterals that much since you are certain that you can repay with no issue, then this is a good loan for you.


Debt consolidation loans are precisely what the name implies. If you have a collection of loans like medical bills, credit cards, or student loans all haunting you, then a DCL will marry all these into one particular loan that you can pay off monthly while reducing the cost accustomed to them. This way, you can save paying high interest while managing your debt.


It can either be secured or unsecured but is vitally contingent that you get yourself a co-debtor acting as the guarantor. So put, two of you will participate in the transaction and the guarantor in this exchange will be the one to pay the debt if you become insolvent and default.


If you have no bad credit history, then this loan is for you. Unlike the typical monthly payments, a personal line of credit will allow you to borrow up to X amount of money needed at any time. So even if you don’t need the loan right now and decided not to get one, you won’t be paying any interest for the total loan. In emergencies, this is perfect since you will only be charged on the amount you borrowed that is within the parameters of the capped line of credit. In other words, it’s like a savings account, but instead of your own money, it’s borrowed.

Now that you know a lot more about loans, you should be more careful and decisive about which ones you should take. Just remember to pay on time and in full. Having debt can be a great thing if you know how to use it.