Unsecured personal loans allow a person to borrow money for whatever reason they need it. This includes new businesses, or even high-end things like jet skis or a new car. Once one decides to get an unsecured personal loan, they should definitely explore their options.
First, one must understand what it means when the loan is not secured. This means that no collateral is necessary to obtain the loan. If things go wrong and the loan is not repaid, it is less risky because no property will be lost or held until the loan is repaid. This is more comfortable for most people as there are no immediate consequences which give them time to recover.
The majority of the risks lie with the lender with an unsecured personal loan. If the loan goes south, they have nothing to sell to redeem it. They will undoubtedly go after the money and take legal action against the borrower like earning wages. Due to the higher level of risk, borrowers should expect higher interest rates. In addition, the acceptance of the loan is somewhat dependent on the credit. Good credit equals lower interest, and bad credit may result in higher interest or even a co-signer.
Here are the basic types of unsecured personal loans:
Signature Credits – This is the simplest form of unsecured loan. It is only secured by the borrowers’ promise to pay. Obtainable from credit unions and banks, the money can be used for anything. The fact that they are installment loans means that they are borrowed and repaid in fixed monthly payments.
Better yet, a signature loan can help a person build credit and get better future rates. Therefore, it is by far the best unsecured personal loan in the market.
credit cards Another popular way to get an unsecured personal loan is to take credit cards. On the riskier side, they still give the borrower a pool of money to use as they like with no questions asked. A line of credit will be set and the borrower can charge as much or as little as he likes and pay it off monthly.
The only downside to credit cards is that they fluctuate with regard to the interest rate, with some having an initial low rate as an introduction and then going up after a while. It’s easier to spend with credit cards because it’s so easy to swipe them for purchases. Offers are available online and via mail.
P2P or P2P Loans – Consider a P2P loan as a form of unsecured personal loan. Basically, it is to borrow from an individual rather than from a bank or other traditional lender. These loans are available online and on specific websites and there is a chance that no one will actually get the loan, but it is worth a try. They are fixed rate installment loans and they look at credit.
Student loans Student loans are unsecured personal loans that are provided solely to finance education. They are a good choice because they carry features that are not readily available through other methods. They offer flexible repayment periods, grace periods and more. Some don’t even care about the credit score, they only care if the borrower is a student.
These loans are available through the financial aid office of the attending institution. The professionals there will help the student through the application process and explain all the ins and outs.