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Pros and Cons of an Unsecured Personal Loan


Unsecured Personal Loan

Unsecured Personal Loan

An unsecured personal loan is a loan that you take out with a credit provider that requires no collateral to back up the loan.

Secured loans, like auto loans or home loans are considered secured because the lender can repossess the property you borrowed against, thus removing risk if you default on the loan.

There are different pros and cons involved when taking out an unsecured personal loan.

 

Pros of an Unsecured Loan

You are Not Risking Any Property

Unsecured loans are given out based on your credit score, employment and other information that determines your creditworthiness. When you apply for an unsecured loan the lender determines whether or not you will get the loan based on the chances of you paying that loan back compared to the potential profit they will make back in interest. If you default on the loan the lender has no property they can seize without court proceedings. If you default on a secured loan they can seize the property you bought with the loan, such a house or property you used to guarantee the loan, whether that be a business or other asset.

It is Easier to Get an Unsecured Loan

Unsecured loans have much less paperwork and bureaucracy compared to secured loans. Many lenders offer near or short term unsecured loans over the internet or by phone. The process for secured loans is much more rigorous and can take weeks, months, or years to get approved along with lots of extra costs like assessors fees or brokers fees.

Cons of an Unsecured Loan

Unsecured Loans Tend To Be Smaller

Since unsecured loans are riskier than secured loans lenders generally do not give out as much money as they would on a secured loan. The lender has to manage risk versus reward and often times lending too great a sum with an unsecured loan is not worth the risk.

Unsecured Loans Often Have Higher Interest Rates

Another side effect of the riskiness of unsecured loans is the fact that lenders have to charge more interest to hedge risk. This leads to higher monthly payments for the borrower and adds to the long term cost of borrowing.

Unsecured Loans Have Shorter Payback Periods

Yet another effect of the riskiness of unsecured loans for lenders is the fact that they typically ask for a shorter repayment plan. While many home loans can be as long as 30 years most unsecured loans are for much shorter periods, payday loans accrue interest daily or weekly, while credit cards may be paid back monthly or yearly. Other unsecured loans have longer repayment cycles, but they do not tend to exceed 5 years.

Getting an unsecured loan at a good rate is generally a good move. It is much easier and faster to get an unsecured loan and the borrower has less risk if the loan is not repaid. Many people use unsecured credit regularly for this reason. You can secure a good interest rate along with a decent sized loan as long as your credit is decent and you have a guaranteed source of income.

Written by Peter Coppola, a personal finance and insurance researcher. He enjoys writing for various personal finance blogs. Visit EasyFinance.com to learn more about short term finance options.

 

 

Pros and Cons of an Unsecured Personal Loan

 

 

 

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Unsecured Loan Lenders


Unsecured Loan Lenders

 

Unsecured Loan Lenders

Unsecured Loan Lenders

If you are suffering from a tough financial condition and desperately in need of some financial help, loan is one of the options that many come to your mind. But sometimes, loan providers don’t help you when you in your tough financial condition. There are two types of personal loans that are being available. They include secured and unsecured loan. The major difference between the two loans is that the secured loans demand much more formalities and legal activities which are not required by the unsecured loans. Since unsecured loans have fewer requirements, they get process fast. Hence, these types of loans are also called as fast cash loans.

 

The main advantage of taking a loan from unsecured loan lender is that you are not required to finish so many formalities as are required in secured loans. Paperwork is considerably less and therefore it doesn’t require much time to get sanction. Also, you are not required to go into asset valuations step.  People who generally choose to go for unsecured loans are the ones who don’t have much collateral to offer. Such borrowers include mortgage arrears, tenant, non home owners and various others. However, there are many who choose to go for taking loan for unsecured loan lenders. Reason being that they might be facing financial crisis and don’t want to put their real estate and other property at stake.

 

But every story has two sides. Story is not yet finished. Since it is unsecured loan, they charge you with high interest rates. They can vary from about 7% to 30%. But this action of unsecured loan lenders is justified. Since they are providing you with the required amount of money at much less legal papers and formalities, their money is always at stake.

 

The plus point of unsecured loan is that the money you get from, it can be utilized in any form you want. You can choose to use it for new car, home improvement, and holiday trip and to fulfill much more activities of yours. The only drawback being that they charge you with much higher rates.

 

The repayment period of the money that you borrow from unsecured loan lenders is about 2 years to 7 years.  Also, the money that can manage to get from such loans is not as higher as you can manage to get from secured loans.  Nowadays, due to the rising competition, taking a loan is not a difficult task to achieve. You can shop around in your city and can definitely manage to discover various unsecured money lenders. You are just required to shop around and get an idea of the interest rates that they are offering. Always try to explore new ideas and new people from whom you can easily manage to fetch money at much low interest rates.  Don’t be in too much hurry and conduct proper research. Even a small difference in the interest rates can provide to be of great help in long turn.

 

Unsecured Loan Lenders

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