Unsecured loans are loans that are offered by the lender to the borrower with a promise to pay it back. Due to the increased risk that is involved, this type of loan attracts high interest rates. An unsecured loan is also referred to as signature loans or personal loans. Before one decides to borrow unsecured loan, you should check out on the interest rates. Unsecured loans are often most expensive and less flexible than secured loans but they are suitable if the lender is in need of a short term loan.
There are hundreds of different unsecured loans to choose from therefore comparison tables have become a popular way of finding out the different options available. Unsecured loans enable you to borrow money without offering up security based on an asset. Unlike secured loans, an unsecured loan is primarily based on your personal credit rating, your financial status and the amount borrowed. This does not require you to offer your car or home as security for the loan. This does not mean that you do not have to repay back but you are legally bound to pay back the loan as agreed.
Some of the reasons why people take unsecured loans is to consolidate debts in to one less expensive loan. In deciding to offer you unsecured loan, the lender ensures to check your personal credit history to access the risk involved in lending you the money. The level of risk reflects the rate of interest. Some of the reasons behind the unsecured loans are that they are designed primarily for short term expenses and are intended to be paid back within a year though the terms vary depending on the agreement between the borrower and the lender.
Bank customers often apply for unsecured loans with an aim of getting fast cash. This type of loan is not offered to everyone as some require that a customer should have steady income, must be trustworthy as well as have a history of online repayment. Other unsecured loans can be between family members. They are often informal and may not be documented in writing.