People often resort to personal loans for different purposes. These loans can either be secured or unsecured. In this article, we’ll be focusing on unsecured loans- what they are, how they work and how to find the right unsecured loan in the market.
What are Unsecured Loans?
As its name implies, an unsecured loan is a loan that doesn’t require the submission of any collateral from the borrower. Most people prefer this type of loan because it frees them from the risk of foreclosure in case they fail to keep up with their payments. Nevertheless, because an unsecured loan poses more risk to the lender, most lenders charge high interest rates and fees to their clients.
People with excellent credit history can acquire an unsecured loan with lower interest rates. On the other hand, those with poor credit rating may need to settle for an unsecured loan with higher interest rate. Still, this doesn’t mean you should stick with lenders that impose excessive fees and unfair terms. By doing research, you can compare different lenders and choose the one that offers the best deal.
What are the requirements for an unsecured loan?
Specific requirements may vary from one lending company to another. However, the basic requirements are often the same. In order to qualify an unsecured loan, a person must show proof of a stable of source of income. A regular employment or a business can qualify a person for an unsecured loan.
Permanent residence is also necessary. An applicant must provide his personal home address where he or she has been residing for at least three years. These requirements give the lender some confidence on extending the loan to a client.
The maximum amount for an unsecured loan may range from $1,000 to $25,000- depending on the lender. Generally, the repayment period for unsecured loans is shorter when compared to secured loans. Since unsecured loans usually have higher rates, it is interesting to note that the sooner you completed your loan payments, the more money you can save from the cost of monthly interest.
Find the Right Lender
Despite the fact that unsecured loans have higher fees, many people still choose them over secured loans. For one, not everyone has a home property to submit. If you’re a homeowner, perhaps you may want to apply for a secured loan. If you’re only renting a home, then an unsecured loan is your only option.
Because this type of loan doesn’t require collateral, they’re also easier to obtain. The application process is usually completed within a day or two, depending on the lender. If you need the cash for emergency, an unsecured loan is your best choice.
Nevertheless, before signing up with any lender, take some time to do research and to study your choices. Make sure that the lending company you’re dealing with is a legitimate and reputable one. Check if the interest rates and the rest of the fees are reasonable. Last but not the least, carefully read your contract before submitting your application.
About the Author
Sandra Thompson is a loan consultant with Unsecured Loans Now and has been providing consumers and business owners with Unsecured Loans since 1989. For years she has helped people with loan and credit problems especially pertaining to Unsecured Personal Loans, Business Loans and Unsecured Credit Cards. Copyright 2007.