Personal loans have been around for many years and are simply a contract between two individuals that a certain amount of money will be lent at a certain interest rate and the loan will be repaid with a specified period. If you lend money to a friend or family member you are providing them with a personal loan. In most cases with friend and family the interest and repayment terms are not very formal and the contract is concluded with a simple handshake.

In a purely financial view, personal loans are a financial device that are available to borrowers who have low credit scores or have recently been involved in bankruptcy proceedings. Personal loans are considered high risk by the issuing lenders and therefore tend to have higher interest rates than more tradition loans, strict repayment guidelines and hefty penalties for late or missed payments. Loans of this type also tend to have higher origination and processing fees than traditional loans since the lender is assuming a much greater risk of default.

Although they can be difficult to obtain, personal loans are available to you and can be an excellent way to rebuild your credit if you have had financial difficulty in the past.