Most people who are in need of additional financial assistance turn to personal loans. Some individuals apply for a secured loan which requires them to submit their property (can be a home, land, car, etc.) as collateral. What if you don’t have a property to back up your loan?
The Basics About Unsecured Personal Loans
In general, an unsecured loan does not require a borrower to provide a lender any form of collateral which means you won’t have to put your home or car on the line. This type of loan is based solely upon the borrower’s credit rating.
The Factors
People with a good to excellent credit score can expect instant approval plus lower interest rates. On the other hand, a person with a lower credit score can have his/her loan application approved. However, it is to be expected that he/she will be given a higher interest rate due to the high risk involved.
A borrower’s income history also plays an important role in the decision-making of a lender. Since there is no collateral involved, a lender needs assurance that you can repay the loan on time. Lenders prefer employees with satisfactory average income than employees with lower income.
The Terms and Conditions
The loan’s Terms and Conditions, as well as the repayment options, are expected to be different, depending of course on the loan company you are dealing with. Generally, repayment of an unsecured personal loan is shorter than a secured loan since quick repayment of funds is considered as a safer option by most lending companies. Most lenders will give borrowers five years or less to pay back the money, regardless of how much is the loan amount.
Things to Remember Before Submitting an Application for an Unsecured Personal Loan
- Collect Then Select. Avoid submitting loan application to every lending company you encounter. Search the internet for lenders who offer unsecured loans, compare your possible options and choose the lending company that offers the best deal. Multiple loan applications, especially rejected applications, might give lenders a bad impression about you.
- Negotiate. Even if you have a bad credit history, you can try to negotiate for a lower interest rate, higher loan amount and/or longer repayment terms. This is why you should shop for possible options first before making a final decision.
- Check your Capability of Paying the Loan. It is very important that you are capable of paying your monthly dues on time. Whether you have a good or bad credit history, late or missed payments can leave a negative remark on your credit report.
NOTE: If you are in need of a huge amount and aims for a much lower monthly payments, applying for an unsecured personal loan might not be the right thing for you to do. Instead of forcing the payments to work with your limited budget, try to evaluate if there is anything you can offer your lender as collateral or reduce your total loan amount.
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 2010.
