Running out of money is common since expenses are reaching the sky year after year and earnings are reducing as well. People earning a normal income have nowhere to go but to turn to loans as they can help in times of need.
To get a loan, one needs to put their property, car or any valuable item as collateral, this is what secured loans ask for. However, not everyone has their own homes or a vehicle to use as collateral. For them, unsecured loans are the best option. You should know how to get loans and all aspects of it so that you can get the loan that you actually need.
What Are Unsecured Loans?
Unsecured loans don’t require the borrower to have any property or vehicle which is why a large number of people opt for this loan. It doesn’t hold any risk of losing any asset and gives peace of mind to the borrower.
Unsecured loans are a bit daunting to get since the borrower’s credit history is highly considered. People with a bad credit history may not get an unsecured loan easily and even if they do, the amount wouldn’t be much.
Types Of Unsecured Loans
There are many kinds of unsecured loans that can be taken in time of need without using anything as collateral. These include:
Payday Loans: This type of loan is for those who want a smaller amount for a few days. Payday loans require the borrower to be employed and have a running bank account. The amount of money that can be borrowed ranges from $100 to $1000. For higher amounts, one needs to have a good credit score.
The due date to return the loan with interest is 14 days, after which the lender may increase interest rate. Therefore, make sure you pay it back in time.
Student Loans: Students who can’t pay their fee can opt for student loans without having to use anything as collateral. Student loans are given to students with the intention that they’d pay monthly installments with an interest fee.
There are two kinds of student loans that can be opted for, government loans and private loans.
The amount of money one applies for depends on a few factors such as the status of the student (undergraduate, graduate, professional student etc.), independent or living with family, financial needs etc.
Undergraduate students can get $5,500 per year while graduates can take $8,000 per year and the interest may vary between 6% to 8%.
Personal Loans: These loans can be taken by anyone. There are many loan giving companies out there willing to pass loan application of individuals who have a good credit score and a steady source of income.
The better your credit score, higher the amount you can take home. Normally, these loans range from $200 to $20,000. However, one needs to have a good credit history and a credit score of 750 or more to get a personal loan approved.
Benefits Of Unsecured Loans
Open For Everyone: Unlike secured loans, there’s no requirement to have any sort of property or vehicle to use as collateral. All a person needs to apply for an unsecured loan is to show employment history, credit history and have a good credit score.
Less Risks Involved: Unsecured loans give you peace of mind because there’s nothing at stake that belongs to the borrower. In case the borrower fails to pay their monthly payment then his or her home or property won’t be seized, however, the lender may move to the court.
The Verdict
Unsecured loans should only be applied for when smaller amount of money is required and when you have a source of income to pay it back.