One reason why some look to personal loans for lending is because of the flexibility that they offer. Unlike a lot of other loan types, personal loans can be either secured or unsecured.
A secured loan is a type of loan where an asset from the borrower is involved, while unsecured loans don’t require an asset for security.
There are a few reasons why some borrowers decide to go with an unsecured personal loan over a secured one. In this article, you will find more details on unsecured personal loans, what they are, and the conditions in which people choose to get one.
What Are Some Characteristics of an Unsecured Personal Loan?
Here are some characteristics of unsecured personal loans, which may be helpful to know before signing up for one:
- The average interest rates will be around 5% to 36% of the principal amount.
- The length of the loan can vary from one to five years.
- The value of the loan ranges widely.
- The funding from personal loans can be used for almost anything.
What Factors Will Lenders Look at When Giving Out Unsecured Personal Loans?
When it comes to eligibility for unsecured personal loans, lenders will look at a few details about their borrower:
A credit score is what many lenders look at to determine eligibility for unsecured loans. This is because a credit score gives a lender an idea of a person’s financial habits and how they have handled previous lending and credit accounts. As a borrower, it may be helpful to know what that score is before speaking to a lender.
Lenders will definitely factor in a borrower’s income when determining eligibility for an unsecured personal loan. This will show the lender that the loan can be paid back and even help them come up with an appropriate repayment schedule.
Ability to Repay the Loan
Personal loan lenders will factor in a potential borrower’s income along with any other bills, debts, or monthly payments to figure out if the loan can realistically be paid back with the terms of repayment (which both parties will have agreed on).
It is important to keep in mind that these factors will impact more than just eligibility, they will also impact the interest rates, which affect the overall cost of the personal loan.
Where Can I Find an Unsecured Personal Loan?
There are many places that unsecured personal loans can be found. Take a look at two categories of lenders:
These are lenders that give out loans themselves, they usually have set rules and requirements of what they expect from their borrowers when determining eligibility. A few examples of these lenders are:
- Credit Unions
- Independent Loan Companies
These are lenders that cannot give out personal loans themselves, but instead work with a network of several direct lenders. MaxCash is one of these types of lenders. Indirect lenders tend to offer flexibility with eligibility requirements simply because they have so many different lenders they work with. One can connect with them via:
- Their Website
- Their Phone Number
There are advantages and disadvantages to both kinds of lending, and it’s a good idea to check out both kinds before choosing a personal loan lender to work with. For those with good credit, a personal loan should be fairly easy to find, and then the search work just becomes about finding a lender with the most competitive rates.
When to Consider a Secured Personal Loan Instead of an Unsecured One?
The alternative to unsecured personal loans is getting a secured one. A secured personal loan will have an asset involved with it—anything from a home to jewelry. Generally, lenders will ask for an asset to be involved if a potential borrower has less than perfect credit.
A secured loan will have different attributes when compared to an unsecured loan, here are some of those:
- The interest rates will most likely be higher than unsecured personal loans.
- The consequences of defaulting on the loan will mean losing an asset.
- The repayment plan and the personal loan terms may be more rigid.
- A potential borrower may have to look at several lenders before finding one that deems them eligible.
Those with less than good credit will have a few obstacles that their counterparts may not have to face. However, this does not mean that personal lending is not available to them.
Secured loans are actually designed just for that reason, and so it just becomes about looking at several lenders and then going with the one that offers the most competitive rates.
If a person has looked into personal loans, they may come across unsecured personal loans. Unsecured personal loans are loans that do not require an asset and are mainly available to those with good credit.
There are a few characteristics of unsecured personal loans that potential borrowers should know about. In addition, it may be helpful to know exactly where to find these loans and when a person should think about the alternative to unsecured personal loans.