In earliest days of the American economy, internal savings were lent as loans to reputable individuals to fund buying of boats and barbeque pits. The ease of availing a loan depended on the income (defined by the job type)and the borrower’s honesty in paying his bills regularly. This type of personal lending has taken a leap change in today’s mass society. Today, money can be borrowed for almost any purpose. Borrowed loans can help as funds to start a business, consolidate debt, buy an expensive toy, buy a home, study, etc. It can be borrowed from family members, friends, individual money lenders, giant national and regional banks lending money to borrowers, each with their terms and conditions for borrowing money that is called as a personal loan.Personal loans largely fall into two buckets- Unsecured and secured loans.

• Unsecured loans: There is no collateral (security) provided by the borrower to guarantee a lender on the repayment of the loan. Lending such debts are risky for the lender since he has nothing to seize in case the borrower defaults to repay the loan’s principal and interest and completely relies on the integrity of the borrower.On the other hand, the borrower has less risk as he doesn’t lose any asset if he fails to repay. However, his credit history can get affected or even might face a legal action. Because of the high risk involved in lending, the interest rates are generally higher compared to secured loans. The borrower’s credit is an important factor that determine the eligibility for an unsecured loan. If his credits are good, lower interest rates will be charged, and more loan options will be available to the borrower. With bad credit, the options may be limited, interest rates may be very high, and in certain cases, one might need a co-signer or surety to get approval for a loan.Credit cards, cash advances, student loans, peer-to-peer lending are some examples of this type of loans, also called as un-guaranteed loans.
• Secured loans: A collateral in the form of an asset, usually a house or a car is pledged in order to borrow a loan amount. The debt will then be paid back with an interest amount added in installments for a set period.If there is a default in repayment, the creditor can take the asset thereby giving a guarantee to the lender by the borrower of repayment. Hence, these loans are also called guaranteed personal loans. Home equity, standard vehicle loans are examples of guaranteed personal loans.
  How to decide what type of guaranteed personal loans you need?

Having understood the differences between both the loan types, doing a self-analysis might help to clear the doubt. Firstly, check if you have an asset (typically a home or automobile) that can be pledged as collateral. Then, decide if you are willing to take the risk of losing that valuable asset if you fail to make the payments on the loan.

If “Yes”, then a guaranteed personal loan is the option to choose. Since the asset itself has value, one can borrow more money at a lower interest rate.

If “No”, then choose an unsecured loan. With this, the borrower gets lesser money with high interest rates.

Next, there are certain factors that will be looked into by a potential lender to decide the eligibility or the rate of interests for a guaranteed personal loan.

Borrower’s credit score: The credit reports need to be accurate and error-free which indicates the borrower’s honesty levels in paying back the loans.
The annual income: This factor determines the capacity of the borrower to fun his loan repayment.
Debt-to-income ratio: This indicates how much a borrower can responsibly afford based on his current debts in hand.
Employment details: The current employer name, number of years worked at the employer etc. determine how well the borrower can manage to pay the monthly installment.
Borrowing loan itself is a huge risk. Availing such financial sources can get the borrower into deep trouble if some factors are overlooked or small mistakes done unknowingly at the time of borrowing. Here are a few things to beware of at the time of borrowing a loan.

• Advance money is not asked by legitimate lenders. Any form of payments related to the loan such as processing fee, review fee, application fee,document fee, insurance fee etc. are disclosed separately by the lender and usually rolled into the cost of the actual loan lent by an authentic lender.
• Wire transfers are not done to any individual. The name of the business and the physical address needs to be verified before transferring any money towards the proposed fees.
• Guaranteed personal loans are issued only after the evaluation of credit score and financial situation of the borrower. One must not respond to callor invitations for applying for an already approved personal loan with a “guarantee”.
• Interest rate are mostly fixed by a combination derived from credit score, borrowed amount and the repayment schedule. Once fixed, there will be no hikes anytime in future by any economic inflations.
• Read the company spelling carefully before you opt for guaranteed personal loans. There can be several fraudulent companies that try to do business with a very similar sounding name or a very similar looking logo to a reputed lender. Verify the business name and the physical address before signing any documents with a company and applying for guaranteed personal loans.