Putting up the collateral for a loan is often a very scary experience. Putting up your home as collateral on a loan means risking having your home taken away if you aren’t able to pay the loan back. There are also many people that don’t have the collateral necessary to secure a loan that requires it.
There are millions of people in the U.S. that don’t have property that can be used for collateral, but they often need a loan just like the people that do have collateral assets. For these individuals, there are other options available.
Unsecured loans fulfill this purpose and while they carry interest rates that are higher than a secured loan, they are within reach for almost anyone that has a solid credit history and employment.
You don’t need to offer anything as collateral when you get an unsecured loan. This is often the only way to secure a loan if you don’t have any valuable assets and it’s a good way to go if this is the case for you.
Banking institutions take on more risk when they offer this type of loan, so they will generally charge high interest rates. If the bank had a home they could take in the case of default they could make some of their money back. Since this isn’t the case with an unsecured loan, they have to earn more money per loan to reduce risk. This means you will pay more in interest.
Since this loan type doesn’t offer much protection to the bank, this type of loan is usually only available to individuals that have a solid credit history. For people that have bad credit, there is another type of unsecured loan called a payday loan. As long as the borrower is employed and has a checking account, they can usually secure a loan of this type.
A simple but nice feature of this type of loan is that you can use the funds for any purpose. Other types of loans have restrictions. For example, an auto loan obviously has to be used to pay for a car. A home loan has to be used to buy a home. With an unsecured loan, you can improve your home, start a business, pay bills, or do anything else you would like to do.
There are now hundreds of websites that offer individuals with this type of loan. You can also go in to your bank to apply for a loan, or apply over the telephone. Applying in person with a local bank will often provide you with the most flexibility.
Author: Dave DavisThis author has published 8 articles so far.