The differences between secured and unsecured loans and their respective advantages and disadvantages have been widely discussed. This article does not focus on that. Our goal is to put together an easy, first-hand guide to unsecured loans without going into obvious terminology or explanations.
What to expect in terms of rating
It is common to believe that only people with bad credit or those who do not own a home apply for unsecured loans, but this is a mistake. In reality, anyone can apply for a loan like this. The thing is, if you have a good credit and score and own a home, your options will be more extensive (including secured and unsecured loans), that’s about it. I believe there are no real limitations when it comes to qualifying and being approved for an unsecured loan. It’s just a matter of finding the right lender. A kind of “being in the right place at the right time” and, of course, lots and lots of research.
Your monthly income and ability to pay will determine your eligibility. Unemployed people will have a harder time getting unsecured financing, but a good credit score might help. If this is not your case, then your chances of approval will be slim, but keep in mind that there are always kind souls willing to lend a hand, never give up your search.
Applicants will need to provide the lender with proof of income, and some lenders will even run credit and background checks on applicants. Be sure to ask the lender if 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 for your social security number, a credit inquiry is likely.
Average Unsecured Loan Term
Unsecured loans can provide the borrower with a sum of money ranging from $1,000 to $25,000. A regular repayment period will range from 6 months to 10 years.
The risk assumed by the lender
Since this loan is not secured against collateral (unlike secured loans), the lender takes on significant risks. As a result of this, the interest rates on unsecured loans are often higher than those on any other type of loan.
Also, if you miss a payment, or even if this payment is just late, the lender could crack down on the uncertainty of the loan. There is usually a lack of tolerance when it comes to late payments and some lenders can even take you to court quickly.
Unsecured loan purposes
There is no limit to how much you can use the loan. That’s the beauty of it, as long as it’s not dubious or illegal, you’re free to do what you want with the money, you set the limits!
Another advantage
As you well know, this type of loan is free of guarantees. When it’s time to apply, unsecured loans are often granted in a short period of time. Fast approval is one of the trademark features of this type of loan.
Whether you’re a non-homeowner, a renter, or a homeowner who doesn’t want to put their property at stake, there’s an unsecured loan waiting for you!
