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 has decided to get an unsecured personal loan, one should definitely explore their options.
First, one must understand what it means when a loan is unsecured. This means that there is no collateral required to get the loan. If things get worse and the loan is not paid, then it is less risky because no property will be lost or retained until the loan is paid. This is more comfortable for most as there are no immediate consequences to give them time to recover.
Most of the risk remains with the lender with an unsecured personal loan. If the loan goes bad, they have nothing to sell to recoup the amount. They will undoubtedly go after the funds and even take legal action against the borrower, such as wage garnishment. Due to the high level of risk, borrowers should expect higher interest rates. In addition, the acceptance of the loan depends a little on credit. Good credit equals lower interest, and bad credit can result in higher interest or even a co-signer.
These are the basic types of unsecured personal loans:
Signature Loans – these are the simplest variation of an unsecured loan. They are only guaranteed by the promise of payment of the borrowers. They can be obtained at credit unions and banks, and 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.
Even better, a unique loan can help a person build credit and get even better future rates. Therefore, it is by far the best unsecured personal loan on the market.
Credit cards – Another popular method for an unsecured personal loan is by obtaining credit cards. A little on the riskier side, they still give the borrower a pool of money to use however they want no questions asked. A credit limit will be assigned and the borrower can charge as much or as little as he wants and pay it monthly.
The only downside to credit cards is that they fluctuate in interest rate, and some have a low introductory rate and then go up after a period of time. It’s easier to spend with credit cards because swiping them to make purchases is so easy. Bids exist online and by mail.
P2P or peer-to-peer lending: Consider a P2P loan as a form of unsecured personal loan. Basically, it is borrowing from an individual and not from a bank or other traditional lender. These loans are available online, on specific websites, and there is a chance that no one will pick up the loan, but it is worth a try. They are installment loans with a fixed rate and they do look at credit.
student loans – Student loans are unsecured personal loans made only to finance education. They are a good option because they have features that are not available through other means. They offer flexible payments, grace periods, and more. Some don’t even care about credit score, they only care if the borrower is a student.
These loans are available through the financial aid office of the institution served. The professionals there will help the student through the application process and explain all the ins and outs.