The capacity to borrow unsecured loans is based on financial status, personal credit ratings of an individual and he is not required to offer any expensive asset as security for the loan. All one has to take care of is pay back the loan as per the agreement.
Your personal credit score is one of the most important factors on the basis of which loan are granted to an individual. There are few more factors you should take care of before taking any such loans.
The interest rates on unsecured loans are generally higher than secured loans or the loans which is backed by any collateral for consolidations. The rate depends on credit worthiness; if you have good credit score then you can get unsecured loans very easily and at affordable interest rates. You can get unsecured loans on minimal document submission. You just need to have three basic documents i.e. identification proof, verification of address and proof of past income. At the time of loan, an individual has to also submit bank statement and income tax return as proof of past income. After providing this information, you need to specify the amount you want to borrow and the amount of time you need to repay loan. These two factors will decide the rate of interest.
One of the basic ingredient and deciding factor of unsecured loan is personal credit rating and an individual should work on this before approaching for any loan. It means you need to show regular and healthy transactions in your bank account. Personal credit score also increases if you have a good and settled job. Lenders prefer to give loans to individuals who have government job, as they are not prone to any market risk or job security
Problems in unsecure loans
If you have poor credit rating, it is going to get tough to get approval from the lender for the unsecured loans or the lender may not offer the amount you need. They usually offer a smaller amount which might not be enough to fulfil the need of the borrower. An individual should not forget that in event of failure to repay the loan; personal credit score can get affected.