Loans are types of debts that involve monetary exchanges. The creditor lends money to the debtor who in turn repays the same with interests. Loan itself has different types. The most common of which are the secured loans or loans with collateral or mortgage and another type of loan that does not involve any security which is also called unsecured or personal loans. A secured loan has lower interest rate since the creditor has certain security that the loaned amount will be repaid either by the same principal obligation or through the accessory obligation by foreclosing the said mortgaged property. The amount of loan granted to anyone who applies for a loan with collateral or mortgage depends on the value of the property used as a security or accessory obligation. Unsecured loans, however, have higher interest rates due to increased risks on the part of the creditor. The creditor would want that such risks be compensated and the principal be paid quickly hence this type of loan entails higher interest rate and a relatively shorter period of terms of payment. The amount of loan granted for an application for unsecured loan depends on the personal background of the applicant. This personal background pertains to the person's credit history, capability to pay, monthly income, and current financial condition.

Whatever type of loan one obtains, it is very important the he or she makes good use of the loaned amount. If the person has several debts, the said loan can be used to consolidate these debts and maintain one principal debt to lower the interests he or she is paying every month from these various debts. A proper debt consolidation plan must be availed by such person to ensure that his or her debts are paid off strategically. If the person obtains a loan for the purpose of securing additional purchasing power and an emergency cash savings, it would be best that the person first consider another type of loan which is the home equity loan. A home equity loan offers a credit line where one can withdraw in a staggered basis the approved loan amount. In this case, only the withdrawn amount shall incur interest. Further, to ensure that these money are spent wisely, it is also highly recommended that the person obtaining such loan observe proper personal finance and seek other tips and strategies from financial advisers to ensure a sustainable financial stability.

Having mentioned all of these, it is but apparent that the money loaned really provides financial relief on the part of the debtor. However, such relief can be for a short or long term. The manner and purpose of spending the money loaned is crucial in ensuring that such loan will certainly benefit the person for long. Hence, it is advised that prior to obtaining a loan, one must first determine the objectives and main reason for applying for the same. Upon approval, he or she must maintain focus on these objectives so that the money will be used wisely to reap benefits both at present and in the future.