Personal loan is a term which includes different meanings. All kind of loans can be described under the head ‘personal loans’. All the consumer loans like equity loans, lines of credit, mortgages etc come under the category of personal loans. There are other loans colloquially known as “signature loans”. These loans are mostly taken for purposes other than business. These signature loans are unsecured loans in which the lender could not take anything, when you default for the loan amount.
Personal loans are a financial tool which can be used for getting financial support for various expenses at times of financial needs. You may need to take personal loans for certain expenses like medical expenses, summer vacation expenses etc. Sometimes these personal loans can be either a curse or a boon. It is easy to get a loan as there are lots of sources available in UK . The remarkable thing is that you have to shop around to get a loan at the minimum rate of interest.
Classification of personal loans
Personal Loans are classified into four namely:
o Cash out mortgage refinancing
o Home Equity Loans
o Home equity lines of credit
o Signature loans
Take a look at each type of loans in detail.
Cash out mortgage refinancing
You will understand what this type of personal loan is with an example. You take a mortgage for 80,000 pounds or on 100,000 pounds. The value of your house goes up to 110,000 pounds. Therefore you can easily take second mortgage for 90,000, with this amount you can set off the first mortgage. You can have remaining amount 10,000 pounds in hand. This is called as “cash out mortgage refinancing”.
Home Equity Loans
Most of lenders want to offer personal loans using the equity as collateral. The lenders are ready to lend you loan up to 125% of the value of home’s equity. It is advisable not to go above your original value of your home.
Home equity lines of credit
These type of personal loans are the as same as home equity loans. The only difference is in the flexibility of credit line. If these types of loans are approved once, it is possible to get extra funds to cover all expenses that you need.
These loans are slightly different from the other three types. These loans never require collateral. You can get loan without pledging any property or any valuable asset.
You may select any of the above explained personal loans depending up on your requirements. Never sign a loan agreement without understand the terms and conditions of the agreement.