Personal loans are common and can be secured, requiring collateral, or unsecured, without collateral. Secured loans typically have lower interest rates due to reduced risk for lenders, while unsecured loans have higher rates and additional fees. It's important for borrowers to understand the fees and interest rate differences when considering personal loans.

1. PERSONAL LOANS How do Personal Loans Work ?

2. A Personal Loan is one of the most common forms of loan. There are two different types of loan ~ SECURED and ~ UNSECURED. A secured loan is when collateral is used against the loan. Collateral is usually an item of value which is given to the lender if the borrower cannot make repayments. Secured loans pose less risk to the lender so you usually get a better rate. An unsecured loan is the opposite to a secured loan. No collateral is used against the loan. As a result this type of loan will attract a higher rate for the borrower.

3. Personal Loans come with attached fees, this is how the lender will make money. These fees are called interest rates. Interest Rates are referred to as a percentage, which is calculated against the total amount owing to the lender. Interest Rates can differ among different lenders. An Interest Rate can be compounded at different periods. A personal Loan will be either a variable or fixed rate. Other fees you may expect from the lender are fees such as application fees. It is important to ask your broker to explain these fees and their respective costs. The difference between a personal loan and other types of loans is that personal loans are not usually used for business or commercial use.