Personal loans have always been in great demand. However, over the past couple of years, the demand for personal credit has increased further. Market report shows that the UK personal loans market was worth £83 million (approx.) in 2006. Currently, it accounts for over a quarter of total consumer credit gross lending and is expected to grow by 19% by 2011.



Experts say that people are gradually realising that multiple overdrafts and payment card debts – in the form of credit cards, cash cards and store cards – prove to be more costly, as they have high interest rates. As a result, more and more people are availing personal loans not only for critical and routine needs, but for convenience and indulgence too.

The credit market offers a wide range of personal loan products and most of them can be availed in both secured (credit assistance against collateral) and unsecured (credit assistance without collateral) form. The basic difference between the two sub-types is the presence or absence of collateral, which has both advantages and disadvantages.

Unsecured personal loans are most suitable for small and short-term monetary requirements, and for people who are unwilling to get into property related legalities and risk their property for a small amount (homeowners and property owners), and the only alternative for people who do not own any valuable asset to pledge (tenants and students).

Secured personal loans, on the other hand, are most suitable for big and long-term monetary requirements, and for people who are capable and willing to pledge collateral – homeowners and property owners – as they ensure maximum loan benefits.

Market report shows that the demand for both sub-types is increasing because they both prove to be advantageous in different situations. Basically, no financial product follows a one-size-fits-all approach, and they all are designed with specific criteria and customers in mind. Most of us try to make informed choices that enable us to improve our lifestyles… A financial product should be no different.

The decision to take up a secured personal loan or an unsecured personal loan is ultimately about the consumer choice – it is one option that will be suitable for some and not for others. Hence, loan seekers are advised to choose wisely on the basis of their monetary requirement, credit history, payback capacity, and future plans.