Personal unsecured loans allow a person to borrow money for whatever reason they need it for. This includes, new businesses, or even high-end things like jet skis or a new car. Once one has decided to get a personal unsecured loan they should definitely explore their options.
First, one should understand what it means when a loan is not secured. This means there’s no necessary collateral in order to get the loan. If worse comes to worse and the loan isn’t repaid then it’s less risky because no property will be lost or held until the loan is paid. This is more comfortable for most as there are no immediate consequences giving them time to recover.
The majority of the risk rests with the lender with a personal unsecured loan. If the loan goes south they have nothing to sell in order to recoup the amount. They will undoubtedly pursue the funds and even take legal action against the borrower such as garnishing wages. Due to the high level of risk, borrowers should expect higher interest rates. Plus, the loan acceptance does depend on credit somewhat. Good credit equals lower interest, and bad credit may produce either higher interest or even a co-signer.
Here are the basic types of personal unsecured loans:
Signature loans – these are the most simple variation of an unsecured loan. They are only secured by the borrowers promise to pay. They can be obtained at credit unions and banks, and the money can be used for anything. The fact that they’re installment loans mean they are borrowed and repaid in fixed, monthly payments.
Even better, a signature loan can help a person build credit and get even better future rates. So, it is by far the best personal unsecured loan on the market.
Credit cards – another popular method for a personal unsecured loan is by obtaining credit cards. A bit on the riskier side, they still give the borrower a pool of money to use as they wish with no questions asked. A credit limit will be assigned and the borrower can charge as much or as little as they please and pay it back monthly.
The only downside to credit cards is that they fluctuate as far as interest rate, with some having an initial low rate as an introduction and then it goes up after an amount of time. It’s easier to spend with credit cards because swiping them for purchases is super easy. Offers exist online and via the mail.
P2P or Peer loans – Consider a P2P loan as a form of personal unsecured loan. Basically, it is borrowing from an individual and not a bank or other traditional lender. These loans are available online, on specific websites and there is a chance that no one will actually pick up the loan, but it’s worth a try. They are installment loans with a fixed rate and they do look at credit.
Student loans – Student loans are personal unsecured loans made just for education funding. They’re a good choice because they carry features that aren’t readily available through other means. They offer flexible repayment, grace periods and more. Some don’t even concern themselves with credit score, they only care if the borrower is a student.
These loans are available through the financial aid office of the institution being attended. The professionals there will help the student through the application process and explain all the ins and outs.
This article first appeared on 100storyreviews.com.
Elsa Cardenas writes at 100storyreviews.com, where he shares well-researched ideas for better habits, better decision-making and a better life. To get these ideas, you can join his free weekly newsletter here.
His work has been featured in Business Insider, Entrepreneur, Inc. Magazine, Quartz, Thrive Global and more. – 100storyreviews