Most people will probably need to borrow cash at some time in their lives, whether it is to pay a large hospital bill, repair their car or house, or to buys something they have always wanted. Generally they do it by means of bank loans or through their existing credit cards. Both of these forms of instant cash could be secured – which means the borrower has pledged an asset as a security for the loan, or unsecured – the borrower has no security or collateral provided against the given loan or credit card. Obtaining these sources of “extra cash” might be really complex in most cases and requires that you might have a great credit score and background. What do you do in case you have no assets to provide as security, no guarantor or co-signer and will need to get your hands on some emergency funds?
One choice you have access to would be to get a single or several unsecured credit loans. There is a lot of confusion about what these types of loans really are. Some people might call them payday advances, personal loans, or even credit card money advances. Unsecured credit loans are loans that are provided by banks but are not precisely straightforward and simple to get. Like other unsecured loans, the interest rates on these are higher compared to secured loans. However, compared to unsecured credit cards the interest charged for unsecured credit loans is usually much lower.
Like other unsecured loans or unsecured credit cards the amount that lenders approve for you to get will probably be smaller compared to secured loans. You should recognize that since there is no security or collateral against your loan you pose a higher risk to the lender hence the smaller loan amounts and higher interest rate.
If you are thinking of obtaining an unsecured credit loan do some research and analysis for reputable lenders comparing them to each other in terms of lowest interest rates and easiest repayment terms. There is no sense in digging yourself further into debt with another loan that you will have a challenging time paying off. Should you find yourself not having the time to search for lenders you might be able to consider asking for support from personal financial advisors or checking out reputable internet sites that can help you come across the information that you might be searching for.
If you are someone who needs an immediate solution to your financial problem but doesn’t want to offer any sort of collateral, then obtaining an unsecured loan may just be best option for you. So what exactly is an unsecured loan? These are basically loans that are obtained by a borrower without having to provide collateral and this means that the transaction is far riskier on the part of the lender. This type of loan best benefits those who do not own any eligible assets. Does it sound too good to be true? Well, like with all other types of loans, unsecured loans do have its pros and cons. So if you are looking to apply for this loan, then you might want to evaluate this option more thoroughly and see if it does fit your requirements.
Pros of Unsecured Loans
Definitely the most obvious advantage is the fact that you do not have to worry about risking your assets because it doesn’t have a collateral prerequisite. This is the perfect option for those who are requiring financial assistance but doesn’t want to risk their personal assets like home, car, jewelry and so on. So you do not have to worry about getting your assets seized because you have failed to meet the terms and requirements of the loan.
Another advantage of obtaining this is the ease and convenience of applying for one. As long as you have a good credit history, you will be able to apply for an unsecured loan faster than obtaining a secured loan, home equity loans or mortgages. The process of finalizing this loan is quite fast and it requires minimal documentation and paperwork. This is a very good option for those who are in need of immediate financial assistance.
When you apply for an unsecured loan, the interest rate is fixed. And because of the fixed interest rates, you do not have to worry about changing monthly installments up to the end of the payment period.
Cons of Unsecured Loans
Unsecured loans do come with its disadvantages. And definitely one of the most notable one is the fact that these loans are offered with higher rates. Since there is no collateral involved, this sort of transaction is riskier for the lender. And in order to make things fair for the lender, unsecured loans come with high interest rates. If you want to quality for a lower interest, a good credit record is required.
Another disadvantage is that there is a limit as to how much you can borrow. There is a fixed amount as to how much you can borrow and this is usually determined by the lender. So if you are looking to borrow a large amount, then this type of loan is not for you.
Unsecured loans are needed to be paid back within a pre-decided time frame. And this is usually set by the lender. If you want to pay earlier than the decided schedule, then you need to pay a fine for early repayment. In general, most of the terms and conditions regarding the loan is set by the lender.