There are many types of personal loans available in the market. If you’re in need of a loan, it is very important to examine all your options first before settling with your final choice. One type of loan is the unsecured personal loan. In this article, we’ll consider the advantages of unsecured personal loans over its other loan counterparts.
The difference of an unsecured personal loan over a standard loan is that it doesn’t require the borrower to submit collateral. The collateral used for loans can be one’s home title, car, land, boat, business equipment, savings account and some many other material processions. In most cases, the borrower submits his own home title as a security for the loan. With an unsecured loan, a borrower can have the peace of mind of not putting his home on the line to answer for his debts.Whatever happens, you will not lose your families home just because you failed to submit your loan payments on time.
Nevertheless, getting an unsecured personal loan is often more difficult than secured loans. Since the lender does not demand any collateral, an excellent credit rating is often required in order to be approved. For this reason, some people will fail to qualify for an unsecured loan. If you have good credit and you’re in need of a loan, then you should have no problem getting your unsecured loan approved.
Do unsecured personal loans come with high interest rates? Because of the risks involved, lenders offering unsecured loans often charge slightly higher rates than secured loan lenders. But if you prefer a loan that doesn’t require any collateral on your part, then an unsecured loan is your best choice. If you do research well, it is possible to find unsecured personal loan lenders that offer very reasonable rates.
Once approved, a borrower can usually receive the loan money in as little as 72 hours or even less, depending on the lending company. Repayment periods will vary from one lender to another. Generally, the repayment terms for an unsecured personal loan are 5 to 10 years.
However, unsecured personal loans are 100% based on your credit history and may only be limited to a smaller amount of cash when compared to secured loans. It all depends on your credit. For instance if two borrowers with credit scores of 680 applied for an unsecured loan, and one has had large unsecured credit lines in the past, while the other has good credit but its limited to small unsecured amounts, the borrower with the large loan amounts will be approved for more money, even thought they have the same credit score.
Does this mean that unsecured loans do not have any risk to the borrower at all? Staying true to his repayment obligations is a must for all borrowers whether he obtained a secured loan or an unsecured loan. Take note that if you deliberately neglect your obligations to pay your unsecured personal loan, your lender will of course report you to the credit bureaus. Since the loan amounts are often quite large, many lenders will sue you for the money. A legal law suit against your name will definitely cause damage to your credit. In some cases, the court can grant your lender the right liquidate property you own to get their money if you’ve been found guilty of abandoning your payment responsibilities. To avoid any complications, it is best to take your repayment obligations seriously and stick with what is agreed upon on your loan contract.