More and more people are turning to an unsecured personal loan over credit cards. The reasons are many but generally this is because of the stability in not having to worry about the rate changing or an introductory offering expiring. What is a unsecured loan? How does it compare to a secured loan? Which is better? Is this an installment loan? Are loans available for people with a low income? We provide all the unsecured personal loan details below.
Note, this page is mainly focused on details about an unsecured personal loan. If you are a ready to apply for a loan you may be interested in the following links:
What is a unsecured loan?
An unsecured loan is a loan in which the borrower does not provide any collateral. There are generally three types of secured loans. Personal unsecured loans where an individual is responsible for the payment, business unsecured loans where the business is responsible for the payment and guaranteed unsecured loans where a business may take out the loan but an individual will guarantee the loan if the business fails to pay. This is common with new and smaller businesses.
How does it compare to a secured loan?
With a secured loan something of value is provided to the lender as collateral. Most commonly this is a house or car but can be many things such as land, boats, diamonds, etc. Sometimes it may even be money in the form of bonds. Although it may seem odd to put up money as collateral for a loan there are reasons to do this but we will not cover them here.
Which is better?
Which is better generally depends on the situation. A secured loan will most likely result in a lower interest rate. However there are many reason why a unsecured loan may be preferred. One being that the collateral for a secured loan is often required to be worth several times the value of the loan and the lender typically buts a lien on the collateral meaning it cannot be sold or withdrawn, in the case of money as collateral, without paying off the loan. Therefore with a secured loan there is an element of value tied up in the loan where the unsecured loan will not require this.
Is this an installment loan?
Yes, an installment loan is a loan that is repaid over time with a set number of payments at a regular amount therefore your unsecured personal loan will most likely be an installment loan. You can find additional details about a unsecured installment loan.
Are loans available for people with a low income?
Yes, just like credit cards and car loans, there are loans available and lenders that specialize in loans for low income as well as low credit scores. You may also want to consider P2P Loans.
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