When people often hear about unsecured loans, they tend to shy away from it because of the name itself. But some people apply for an unsecured loan because they can use it to their advantage.
What is an unsecured loan? You might be thinking you need to have a good credit score to be eligible for one. For an unsecured loan, credit scores are not necessary. It might help you get one, but credit standing is not a significant reason why you might get declined or accepted.
You can get unsecured business loans and personal ones, depending on your needs. Here are more reasons why you should get one.
No collateral? No problem
You do not need to put your assets up as collateral when you get an unsecured loan. Let’s say you want to start a business, but you do not have anything to put up as collateral. Unsecured loans will be great for you, and you will not need to worry about losing your house or car if in case the business does not pan out.
Time is of the essence.
Some loans take weeks to process, but with unsecured loans, you can get a response within 24 hours with most lenders. Within that waiting period, you can already think of ways of repaying the debt off. For example, loan apps in Nigeria are on the rise to give personal unsecured loans to individuals. The same is true for other countries. Loans without paper work, accessible in minutes.
Flexibility is the key.
A lender often takes a lot of factors into account when you get a secured loan, but you get more flexibility when it comes to unsecured loans. This type of loan is excellent for people who need money fast, especially if you need extra funds, for a wedding perhaps.
How many types of unsecured loans are there?
There are also a few types of unsecured loans you can consider, depending on what you need it for and how often you need one. The two types that you need to be aware of are revolving loans and term loans.
Revolving loans, like personal lines of credit and credit cards, are great examples. You know how much money you can spend, and you can easily plan how much you can pay off because it has a credit limit. You can use it again and again, as long as you pay it off, thus the name.
A term loan, as the name suggests, follows a set timeframe and amount that you can use and pay off student, business, and personal loans.
You can get an unsecured loan from a credit union or a bank, but some people often go for credit unions because they can give you better interest rates than banks. Although going with your bank for an unsecured loan will not hurt, because they can offer a lot of benefits if you get an unsecured loan with them, especially if you are already a customer.
There are online businesses that can give you an unsecured loan, and you can do the transactions online.
Check to see if you need one.
If you need it for an emergency, an unsecured loan will be great for you, especially if you do not need a lot of money. They are also better compared to credit card companies because they can offer lower interest. If you need an unsecured business loan, all you need is to make sure to do good in your business, so you will not have a problem paying the loan off.
An unsecured loan may get you higher interest rates, but if you have time to shop around. There are loan companies that can give you better rates when it comes to unsecured loans.
Guest Post by Sarah Williams