A personal loan (consumer loan, private loan) could be an option, if you are short on money. But before you are raising a loan, you better learn about concepts like security, fees and interest rates.

What is the definition of a private loan? A private loan is raised by individuals to pay for a buying expense (television, vacation etc.). But if you have other debt, a good reason to raise a new loan could also be to get better interest rates. Another kind of loan (which cannot be compared to a personal loan) is mortgage loan, which is used to pay for a house.

The private loan will normally be raised from banks or individual lenders. It will often be paid back after half a year to five years; compared to the mortgage loans 20 to 30 years payback time.

If you have some kind of security like a house or a car, you can raise a secured loan. In case you fail to pay back your loan, the debt will be settles against the security asset. The advantage of this kind of loan is that it is cheaper than an unsecured loan, because the lender do not have to take a big risk. But you have to think about the risk of losing your home or car, if you cannot pay the loan.

If you cannot (or do not want to) supply any kind of security asset, you should raise an unsecured loan. In this case you will not lose your car or house, if you cannot pay. The lender takes a big risk with this kind of loan, so it is normally much more expensive. And it can be very difficult to raise a unsecured loan, if you have a bad credit history or if you are unemployed.

Before rising a loan, must look at the interest rate. It is a good idea to compare the rates on the internet. You can also ask more than one bank to get the best rate. You can save a lot of money this way.

The amount you want to borrow and how long time it will take you to pay it back; do also have a major impact on the interest rate; the longer time, the higher rate. So make sure that you pay the loan back as fast as it is possible for you.

Another factor is the fee to raise the loan. And while the interest rate varies depending on the amount, the fee will normally be the same no matter if you are borrowing $1,000 or $10,000. So it is vice to rise on large loan instead of many small ones.

Martin Elmer is the editor of Mini laan. Here you can also read about Laan hurtig.

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