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Unsecured loans-an Overview
Are you strapped for cash to pay your home loan’s next installment? Do you need a stopgap solution to solve your present financial constraints? Do you need hard cash to manage your daughter’s wedding expenses? Has your car broken down and you need money to get it repaired completely? If you have any such problems and require quick cash then unsecured loans are your best choice.
In financial terms, there are two kinds of loans i.e. secured loans and unsecured loans. Secured loans are provided by traditional and conventional lenders like banks while unsecured loans are supplied by private lending companies.
If you request for secured loans then your credit history would be completely analyzed and if you have a bad credit history then you may get a loan deal which has a higher interest rate. There is also a need to provide a collateral- a guarantee needed by the bank like your car or motorbike. If you fail to repay the loan in the given time period then the bank can take ownership of the collateral that you provided. Thus, these loans are called ‘secured loans’.
The story of unsecured loans is that they are provided and offered by private lending companies and offer competition to secured loans. People with a bad credit history are the common applicants for these loans. The reason behind it is that your credit history is not even checked while processing your loan application in such loans and thus, bad credit holders can also get a decent loan deal.
However, these lenders mostly offer loans at a higher interest rate while the repayment time is also shorter than secured loans. Yet, the best thing about these loans is that you won’t have much paperwork to do for the procurement of these loans.
Unsecured loans mostly provide stopgap and short-term solutions to your financial constraints. You can use these loans to simply manage your debt and stay away from paying late installments on your home loan. You can also use unsecured loans to pay your college fees while you can also manage expenses which are necessary like repairing your car, renovating your home, building a new kitchen etc.
All these works require a certain amount of money and you can easily get this money with unsecured loans. You must however pay back the loan amount within a year or so. Thus, you must also take into account whether you would be able to repay the loan within the given time or not before applying for unsecured loans.
These loans work best for the people who want to better and enhance their credit history. Just by paying these loans on time, you can improve your credit history and get eligible to secure long-term secured loans from banks.
There are many private lenders present who offer their services online too. Thus, you can strike a loan deal with private lenders from the comfort of your home. You must try to procure unsecured loans which have a lesser interest rate so that you may have no problems in repaying the loan amount at a later date.