Personal Finance Concepts Essay Example | Topics and Well Written Essays - 250 words

Personal Finance Concepts - Essay Example Secured loans are those that are lent by the bank or other financial institutions with some form of collateral or security. Collateral may include personal property that serves to assure the lenders that they will receive their payment or take over the collateral should the borrower fail to pay. On the other hand, unsecured loan is the amount of loan that is lent with an understanding that the borrower will repay it in future according to the agreement without defaulting. The secured loans normally attract lower rates, higher borrowing limits as well as longer repayment period. As a result, they do create less risk to the lender as they can usually sell off the collateral should the borrower fail to make payment (Garman & Forgue, 2012) There are a number of alternatives to loans that can be used by businesses and individuals to finance their financial needs. Such include factoring which refers to a situation in which a business sells its accounts receivables to financial institutions known as the factor and they in turn advance funds to such business under some specified terms and conditions. Hedge-Fund lenders is an alternative financing method that money is lent to higher risk businesses depending on the pitch made by the borrower. The decision to make such a lending is undertaken with due diligence with much