Any one of us may encounter a difficult phase of a life, where we need financial assistance. Financial institutions are one of those who provide us financial assistance in plenty of ways through offering different type of loans. Among those one way is unsecured personal loans.
Demand for unsecured loan is increasing rapidly over the past few years as shown by the statistics.
Now the question is that what is unsecured personal loans? Unsecured personal loans are those which are not secured against any asset of yours. In case of unsecured personal loans, you will not ask for any collateral.
You don’t have to bind your home, your property or any other possessions as a security. Unsecured personal loan provides no guarantee to the lender in case of repayment, as the borrower may default. The lender has to rely on the ability of the borrower to repay the borrowed amount that’s why the loan amount is lower than the other type of personal loans. Thus, the reason is that why these loans called as unsecured personal loans. Due to greater risk of default, the rate of interest is higher. Therefore, your monthly payment will be higher. So choose the type of loan that best suits to your budget. Due to competition in the market, there is a huge variation in the market regarding rate of interest, it may lie between 9 to 15%. For lager type of loan, personal loan is being offered to avoid any huge risk.
An advantage of using the unsecured personal loan facility, you are not taking risks of losing your property or home as the lender is only depending on your credit worthiness. This provides an opportunity for those who don’t have any asset to be secured against any loan. Those who are not able to be qualified for any other traditional loan may obtain an unsecured personal loan. An unsecured loan may be a cheaper mode of financing then the credit card as credit card may have the higher interest rate.
Another advantage of unsecured loans of getting approved faster than other types of loans as there is no collateral is being demanded by the bank. Faster approval also depends upon your credit rating; the higher is the credit rating, less is the chance of being rejected.
What else you can do is the research option. Search out the institution that provides unsecured personal loans that can give you a loan at a lower interest rate as compared to other financial institutions.
Unsecured personal loans are those who provide you an easy and fast financial assistance, when you don’t have any asset for the claim of the loan. Unsecured personal loans provide you financial assistance in case of wedding expenditure, down payment of auto loan, repairing of home and other type of short-term expenditures. Normally, many financial institutions avoid giving unsecured personal loans because of higher risk of being default.
It may be a better option for you to consider another type of secured loans, rather paying higher interest rate.