What is an Unsecured Personal Loan?

Perhaps you have had opportunity to hear about secured and unsecured Personal loans. You might be in a financial situation that necessitate that you take out a loan, however you do not know where to turn, because you have a poor credit rating. Banks and mainstream lenders want nothing to do with you. Where can you turn? Is there a solution that will see you get the cash you need quickly and without any fuss? Can you apply and qualify for a payday loan? These, and other questions like them, have probably crossed your mind at some point. But everyone knows that with a poor credit rating you will never get a loan, short-term or otherwise, right? Wrong!

Loans are used for very specific reasons or purposes. Some, like a mortgage for example, are used to buy loans. Further, a car loan is needed in order to secure transportation. There are loans that are meant for investments and money-making tactics. Any other type of loan falls under the large umbrella title of the Personal loan. The way the money borrowed will be utilized is at the borrower’s discretion. The loan may be needed to pay a bill or for a holiday. The Personal loan will either be an unsecured one or a secured one.

Secured Personal Loans

There are advantages to this type of loan over an unsecured loan. By using valuable collateral, such as your property, the lender sees this as security. If you default on the loan agreement, the lender then has legal right to take ownership of that property. They are then required to sell it and use the amount obtained to offset the loan. Lenders are obviously more willing to loan money when there is this type of security provided. Furthermore, lower interest rates and an easier repayment agreement would be likely.

Because of this the borrower ends up saving a lot of money in what would normally go on interest rates and fees. Whatever you choose to use as collateral will need to be acceptable to the one doing the lending.

The Unsecured Personal Loan

In these difficult financial times many people look to a payday loan to get them out of a financial crisis. For many the reality is a poor credit rating. These people would never be able to secure a loan from a mainstream lender or bank. A payday loan falls under the heading of an unsecured Personal loan. The lender understands that you are not risking any collateral but is prepared to make the loan available to you nonetheless. Naturally this places the lender at risk. All they really have is your word and your signature that you will repay the loan. Because of this, there are some steps the lender will take in order to be willing to take the risk.

One of the ways that a lender will protect themselves is to charge a higher interest rate and higher fees. The amount of money that is borrowable will be limited. Provided the applicant can prove that he or she is employed they will, in all likelihood, be approved for the payday loan, an unsecured Personal loan.