The differences between secured and unsecured loans and their respective advantages and disadvantages have been widely discussed. This article does not focus on that. We aim to put together an easy, first hand guide to unsecured loans without having to actually go into terminology or obvious explanations.
What To Expect On Terms Of Qualification
It is common to believe that only bad credit people or non homeowners apply for unsecured loans, but this is a misconception. Actually, anyone can apply for a loan like this. The thing is, if you have a good credit history and score and you own a property, your options will be wider (comprising both secured and unsecured lending) , that is all. I believe that there are no actual limitations when it comes to qualification and approval on an unsecured loan. It is just a matter of finding the right lender. A “being at the right place, at the right time” sort of thing, and of course lots and lots of research.
Your monthly income and repayment ability will determine your eligibility. Unemployed people will find it harder to obtain unsecured finance, but a good credit score might help you out. If this is not your case, then your chances of approval will be slim, but bear in mind that there are always kind souls out there willing to lend a hand, never give up your search.
Applicants will be required to present the lender with proof of income and some lenders will even run background and credit checks on the candidates. Make sure to ask the lender whether a credit inquiry will be run on your report, as it can lower your credit score if you are not approved for the loan. If a lending institution asks you for your social security number, a credit inquiry is likely to occur.
Average Unsecured Loan Term
No-security loans can provide the borrower with a sum of money ranging between $1000-$25000. A regular repayment period will range from anywhere between 6 months to 10 years.
The Risk The Lender Undertakes
As this loan is not pledged against a collateral (as opposed to secured loans), the lender undertakes major risks. As a result of this, interest rates on unsecured loans are usually higher than on any other type of loan.
Also, if you fail to make a payment, or even if this payment is only late, the lender might take harsh measures due to the uncertain lending. There usually is a lack of tolerance when it comes to late payments and some lenders might even take you to court fast.
Unsecured Loan Purposes
There is no limit regarding the use you can put to the loan. That is the beauty of it, as long as it is not dodgy or illegal, you are free to do as you please with the money, you put the limits!
As you very well know, this type of loan is collateral-free. When the time of applying comes, loans carrying no security are usually granted in a short period of time. Fast approval is one of the trademark characteristics of this loan type.
Whether you are a non-homeowner, a tenant or a homeowner who does not wish to put his property at stake, there is an unsecured loan our there waiting for you!