Personal loans generally fit into two main category types,  secured personal loans and unsecured personal loans. An example of a secured personal loan could be where the loan is used to purchase a motor vehicle and the actual loan is secured by the motor vehicle. If anything should happen where the loan repayments cannot be met the borrower may be able to sell the motor vehicle to pay out the loan or the lender may be able to recover the motor vehicle and auction it to recover money still owing. If there is a short fall the borrower will still be liable to make up the difference.

An example of an unsecured personal loan could be a loan for a holiday. Once the holiday has been taken there is nothing of monetary value to secure the loan.

Secured Personal loans are usually cheaper than unsecured personal loans and personal loan applicants who own real estate are generally able to obtain lower personal loan interest rates than applicants who do not own property.

Applying for a personal loan is similar to applying for any other type of finance where the applicants credit history must be good, income must be steady and able to be proved with pay slips, taxation returns etc.

A loan for residential or even commercial real estate property is generally a much cheaper option of raising finance compared to a personal loan. Many lenders allow the refinancing of property with additional cash out for other uses. Credit cards are now available with lower interest rates and set up costs than a personal loan. 

Most self employed people and businesses will use a lease or chattel mortgage or commercial hire purchase to acquire assets such as vehicles, fleet, plant and equipment.

Personal loans appeal to borrowers who prefer to have a fixed repayment for a loan over a predetermined fixed term and who are not self employed or part of a business.