What distinguishes a personal loan?

A personal loan is characterized as being unsecured and typically utilized for personal expenses. This means that borrowers do not need to provide any collateral, such as a home or other assets, to secure the loan. This feature makes personal loans accessible for various individual needs, such as consolidating debt, covering medical expenses, or financing large purchases, without putting personal property at risk.

The unsecured nature of these loans means that the lender relies on the borrower's creditworthiness rather than any physical asset to back the loan. This distinction is what primarily separates personal loans from other types of loans, such as mortgages, which are secured by real estate, or business loans, which are often designated for commercial purposes and may require collateral.