What is a personal loan?

A personal loan is defined as an unsecured loan that individuals can use for various personal expenses such as consolidating debt, funding a significant purchase, covering medical expenses, or managing unexpected financial hardships. What distinguishes personal loans from other types of loans is that they do not require collateral, meaning borrowers do not have to pledge any assets, such as a home or car, to secure the loan. This factor makes them accessible to a wider range of borrowers who may not have substantial assets to use as collateral.

In contrast, the other options specify loan types that are distinct. A loan secured by a home or property involves collateral and is typically referred to as a secured loan or mortgage. Loans intended solely for business expenses fall under commercial loans, which serve entirely different purposes. Lastly, a type of mortgage for home purchases is a specific form of secured borrowing that is meant for acquiring real estate, further differentiating it from the flexible nature of personal loans.