A personal loan is a type of loan in which the borrowed money is intended to be spent for personal uses. The purpose of borrowing money via a personal loan is to spend the the money for personal uses. As its name suggests, a personal loan is not intended for business purposes such as capitalizing a business, expanding a company, opening a store, or buying a stock.
What are the types of personal loan?
There are four basic types of personal loans in Singapore: a fixed rate personal loan, a variable rate personal loan, a secured personal loan, and an unsecured personal loan. A fixed rate personal loan involves a predetermined interest rate that remains the same for the duration of the loan. The opposite of a fixed rate personal loan is a variable rate personal loan. A variable rate personal loan involves an adjustable interest rate that is dependent on the different movements of the economic index and the various fluctuations in the market prices. A flourishing economy causes the interest rates to fall while a declining economy causes the interest rates to rise.
The difference between a secured personal loan and an unsecured personal loan lies in the presence or the absence of a collateral. A secured personal loan involves the presence of a collateral that serves as the security of the loan. It is an assurance that the lender will still get repaid, in the form of a property or a car, even if the debtor fails to meet his debt obligations. Unlike a secured personal loan, an unsecured personal loan doesn’t involve the pledging of a collateral. Since there are no collateral to secure the loan, the lender is usually very careful when it comes to approving loan applications.
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