Types of Loan

There are two recognised basic types of loan, unsecured loans, that is to say where you don’t need to prove ownership of some sort of asset like a house, this type of loan is often referred to as a personal loan. If you want to borrow a large amount of money then it is highly unlikely that you will receive that money as a personal loan. It is only natural that companies want to find some sort of guarantee that they will get their money back, and other than by legal means, it is not as easy for a company to recoup their potential losses from a personal loan.

The other common type of loan is what is known as a secured loan. When you buy a brand new car and need to borrow the money to do so, this is a kind of secured loan because if you default on the payments then the company can take your car in lieu of the money that you owe. The other, common secured loan is otherwise known as a mortgage or a second mortgage and is a loan that is secured against your property. If you default on your mortgage payments or on your second mortgage repayments, then the loan company can foreclose on the loan and you could lose your home. There are also some companies who will only lend to people who have their own home, again, this type of loan is secured against your property and you could lose your house if you fail to keep up the repayments.