An unsecured loan generally means there is no property or collateral at stake. Secured loans on the other hand must offer something in order to secure the loan – for example, a mortgage loan is often secured with property – borrowers unable to repay their loan may risk losing their home.
Higher interest rates
Because lenders of unsecured loans are taking a higher risk, they will often charge a higher interest rate. They’re also still able to take certain action if you’re unable to repay your loan. Such action may include the lender attempting to collect repayments from your wage; they may even take you to court.
Improving your credit rating
Your credit rating is one of the most important factors to consider when applying for an unsecured loan. Those with good credit scores will pay a lower interest rate and will also have more lending options to choose from. It’s therefore important to improve your credit ratings prior to applying for an unsecured loan.
Many will use an unsecured loan to consolidate debt. This means replacing multiple high interest rate debts with just the one single loan. In a sense, you’ll be putting all of your eggs into one basket, which can certainly make it easier to overcome your debt.
Finance options for cars
Finance options for cars are another popular option considered by those looking into applying for an unsecured loan. A secured car loan is where an investor lends money for the purchase of a vehicle; they will however often take security over the car in order to protect the loan. Once the contract comes to an end, the investor will lift their interest rates, leaving you with free reign on the vehicle.
Such lending options are often extremely flexible and can range in time limits from 12 to 120 months. They also offer both fixed and variable interest rates and either a trade-in or cash can be applied to the loan in question. Other factors to consider include a tax deduction, which is available when the vehicle is used for business reasons.