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Personal unsecured loans allow an individual to borrow money for whatever reason they require it. This also includes new businesses, or high-end items like a jet ski or a new car. Once they have decided to get personal unsecured loans they should definitely explore their options.
First of all, one should understand what it means when a loan is unsecured. This means that there is no collateral required to avail the loan. If worse happens and the loan is not repaid it is less risky as no assets will be lost or retained until the loan is repaid. This is more comfortable for most as there are no immediate consequences giving them time to recover.
Most of the risk lies with the lender with personal unsecured loans. If the loan goes south, they have nothing to sell to recover the amount. They will undoubtedly chase the money and even take legal action against the borrower such as garnishing wages. Because of the higher level of risk involved, borrowers should expect higher interest rates. Also, loan approval depends on the loan to some extent. Good credit equates to lower interest, and bad credit can lead to either higher interest or even a co-signer.
Here are the basic types of personal unsecured loans:
Signature Loan These are the simplest variation of an unsecured loan. They are secured only by the borrower’s promise to pay. They can be obtained at credit unions and banks, and the money can be used for just about anything. The fact that they are installment loans means that they are borrowed and repaid in fixed, monthly payments.
Even better, a signature loan can help a person build credit and get better future rates. So, this is by far the best personal unsecured loan on the market.
Credit Card Another popular method for personal unsecured loans is by getting a credit card. A little on the risky side, they still give the borrower a pool of money as they wish with no questions asked. A credit limit will be fixed and the borrower can charge as much or as little as he wants and repay it monthly.
The only downside of credit cards is that they fluctuate in terms of interest rate, some have an initial low rate as a starting point and then it goes up after some time. Spending with credit cards is easy because it’s super easy to swipe them to make a purchase. Offers are available online and through the mail.
P2P or Peer Loans – Think of P2P loans as personal unsecured loans. Basically, it is borrowing from an individual and not from a bank or other traditional lender. These loans are available online on specialized websites and there is a chance that no one will actually take the loan, but it is worth a try. They are installment loans with a fixed rate and they look at credit.
student loan Student loans are personal unsecured loans made solely for the purpose of funding education. They are a good option because they have features that are not readily available through other means. They offer flexible repayment, grace period and more. Some people don’t even worry about their credit score, all they care about is whether the borrower is a student or not.
These loans are available through the financial aid office of the participating institution. The professionals there will help the student with the application process and explain all the aspects.
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