Unsecured Personal Loans Explained
You can take out an unsecured loan to help with anything from starting a business to asset purchase to consolidating debt. Unlike secured loans such as mortgages, unsecured loans do not require you to put forth any specific collateral to secure or guarantee the loan.
While this may make them easier to obtain, it also means that they tend to come with higher interest rates.
On top of this, you could be subject to legal action and uncertain circumstances in the event that you fail to repay, as the creditor may choose to take what they’re owed through methods like garnishing your wages.
Who Can Get an Unsecured Personal Loan?
Although those with good credit will get better interest rates on unsecured loans, it is still possible to get unsecured personal loans bad credit won’t be able to hinder you from, even if you have had financial trouble in the past, although it will be more difficult.
You can improve your credit rating in a number of ways, including staying on top of regular payments and credit card payments.
Alternatively, you can try contacting a professional advisor who will be able to ascertain whether a loan is right for you.
There are a number of different types of unsecured personal loans that you can choose from, which are explored below.
Credit Cards
Rather than being given a lump sum of money, credit cards allow you to borrow money as and when you need it, so long as it is within your agreed limits.
This is a great option for those who need money fast, but it is important to note that interest rates tend to be high on credit cards, especially once you are out of the initial promotional lending rate period.
Peer to Peer
This type of unsecured loan refers to borrowing from individuals rather than a bank or institution.
They are often competitive when it comes to interest rates and are paid back in regular installments.
There are a number of websites where you can post loan requests, which can then be taken up by creditors.
However, for an individual to agree to lend you a large lump sum, it is likely that they will want to see a good credit rating.
There are articles online that can help you understand your credit score.
Signature or Personal Loans
This type of loan can be provided by banks and credit unions, and only requires a promise to pay via your signature.
Usually, you agree to pay back the loan in fixed regular installments. This type of loan can actually be used to build your credit rating, providing that you keep up with payments.
Student Loans
Student loans are an unsecured loan type that is commonly called upon where funding is needed for education, often offering flexible repayment terms and other benefits.
The type of loan that you go for will depend on your particular situation, including what you are borrowing it for and your personal credit rating.
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Category: Loans
