There are two types of loans that you can apply for unsecured personal loans and secured loans. Both types of loans allow you to reach out to the lender and ask for the borrowing. However, the secured loans are mostly for a specific purpose where the lender will keep some collateral as security against the lending.
Unsecured Personal Loans
Unsecured loans are mostly personal loans. It is the borrowing amount that a borrower can use for any of his individual needs. In case of home financing, or auto financing, both being a secured loan, the purpose of the loan amount is clear. The borrower wants to buy a vehicle or a house, and since the loan is secure bank will also hold assets. In this particular case, the bank will hold the property documents or mark lien on the vehicle as security against the loan.
The Unsecured Borrowing
In an unsecured loan, the person applies for a loan that is usually a smaller amount. Often the lender is not interested in knowing how you will use the borrowed amount as well as you are eligible for the loan. Once you qualify for the loan, the lender will disburse you the amount that you can use for any purpose. Generally, people use unsecured loans to pay utility bills, settle credit card payments, take care of rentals, etc. However, it is entirely up to the borrower to use the amount as he desires.
