Unsecured personal loans are those that can be acquired without any asset to secure against the loans. They are often called signature loans, because all the lenders have as assurance of getting back their money is your signature. Since unsecured loans require no collateral, lenders usually face a high risk. High interest rates are therefore charged to minimize the risk involved.
Nonetheless, these loans are quite easy to get even with bad credit. Most lenders make unsecured personal loans affordable to lenders along with flexible lending periods. Although it might seem foolish to offer a loan without asking for security, there are several reasons why unsecured personal loans are widely available.
For starters, lenders offer unsecured loans to allow bad credit borrowers to improve their credit ratings. The logic behind this is that borrowers with a bad credit history are willing to pay back loans promptly in order to improve their credit scorecard. So if you have a bad credit history, taking several small unsecured personal loans and paying them back without defaulting is not a bad idea after all. Unsecured loans are also easy to get since lenders know that few people actually have collateral to secure borrowed funds. In fact, everyone encounters unexpected situations every once in a while where they need money for small expenses. Whether it is paying for medical expenses, home repairs, vehicle insurance or tuition fees, unsecured personal loans are a great way to borrow money without running the risk of losing any asset.
There are plenty of financial websites where you can obtain unsecured personal loans. All you have to do to secure a loan online with no collateral is to fill out a form and verify other details. Before applying for a loan with an online lender, make sure to check their reputation with the Business Better Bureau. There are plenty of scammers that look for ways of swindling borrowers such as asking for processing fees and charging extremely high interest rates. Therefore, take time to read reviews before taking out unsecured personal loans with any online lenders.
Banks are often hesitant to offer unsecured loans. Lenders with good credit history can have such loans approved by their banks. However, when the debt to income ratio is high, banks fail to approve unsecured loan requests for good credit lenders. Besides banks and online lenders, you can apply for unsecured personal loans with your credit card company. Bear in mind however that interest rates for credit cards are a bit higher than those of unsecured loans.
Debt consolidation is one of the major reasons why you may be in need of an unsecured loan. The good thing with this kind of loan is that you can clear a combination of debts all in one payment. Credit card bills are among the most common debts that you can consolidate with a personal loan. However, this can be tricky especially knowing very well that you are likely to incur utility bills in coming months. Therefore, when applying for unsecured personal loans, you need to make careful calculations of how you intend to pay back the money and at the same time avoid accumulating unnecessary debts.
While unsecured loans don’t require any security, this doesn’t mean that you can opt out in paying back the borrowed money. This kind of action will leave a dent on your credit history and probably affect your ability to secure any kind of loan in the future. Keep in mind that that interest rates are going to be a bit higher for unsecured loans, so take time to shop around for the best rates and flexible lending periods.
