Don’t Research Unsecured Personal Loans at Your Peril By Rakesh Gaikwad At Isnare.com Ezine Articles

A tricky situation - you are in need of a loan but you have a very bad credit history, or have no asset/s for security. There are no friends in sight to help, and you are in despair. If so, an option to be explored is unsecured personal loans.

Unsecured personal loans are loans that do not require any security/collateral. Also called signature loans as your signature is, at times, the only security taken when issuing the loans, these loans are availed of when a person is badly in need of money. In simple words, you get the loan even when you do not have property, stocks, bonds or money in the bank.

It is much easier to obtain these unsecured personal loans now compared to a couple of years ago. Earlier, lenders were very cautious when issuing unsecured personal loans, as the borrower’s credit worthiness was in question. There were more rejections than issuance of unsecured personal loans. But now the situation has changed with firms vying with each other to issue unsecured personal loans.

There are two types of unsecured personal loans, personal and business unsecured loans. In personal unsecured loans, the individual is responsible for repaying the loan.
There are two types of unsecured business loans – one, there is a personal guarantee for repayment (i.e. an individual is responsible for the loan being repaid). The second type is where the business as a whole is responsible for the loan being repaid.

The interest on unsecured personal loans may be higher than the secured loans, but the risk involved is less. In most cases it depends on the credit history of the borrower - and a good credit rating may help in getting a low interest loan. There are firms that give the borrower options of ‘no payments’ for a window period of six months or more. This gives time for the borrower to iron out his financial mess. And, there is very little paper work involved while applying for unsecured loans.

The interest rate for unsecured loans is fixed and remains stable till the loan is repaid. Also, compared to other types of loans, getting an unsecured loan is faster as people in need of emergency funds usually take these loans. However, this rule is exempted when the borrower has a bad credit history.

You may wonder about the disadvantages. Yes, there are but a few. The lender may attach many conditions while issuing these loans. The lender scrutinizes the credit worthiness of the borrower carefully. The payback rate and period is set by the lender and must be adhered to. Fines may be imposed when there is a delay, and even though it may sound hard to believe, when the loan is repaid early. The amount of loan sanctioned may not be as high as expected.

The rate of interest and conditions of loan may be different for each lending agency. Hence, it’s better to do a lot of research before opting for a particular lending agency.

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