Advantages and Disadvantages of the Unsecured Personal Loans

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Unsecured personal loans are those where you don’t have to keep a guarantor or collateral when you take up the loan. Unlike the secured loans these loans don’t take away your possession which you have kept as mortgage. But your reputation and credit score will get harmed if you can’t repay the debts on time.

Unsecured personal loan is an easy loan as its application process is easy. Like every other loan though unsecured personal loan also have its advantages and disadvantages and it will help you make decision whether it’s for you or not –

Advantages of Unsecured Loans

1.      No Collateral or Guarantor

 

If you take up a secured loan then you must have a guarantor or collateral against the loan. When you failed to pay this loan your collateral will be taken by your lender, so it is a risk a borrower takes. But unsecured personal loans don’t ask for collateral and you don’t lose your property or other things. Still try to pay on time and exact amount.

 

2.      Application Process Is Easy

 

Secured loans are complicated to get from any credit union or bank, whereas you can get unsecured loans easily as various alternative lenders provide them. All you have to do is to fill up the online application form and attach some basic documents. It makes your loan taking process hassle free and your assets also stay secured.

Disadvantages of Unsecured Personal Loans

1.      Loan Amounts are Smaller

                                 

From wherever one borrow money they must return it back to their lenders with a certain interest rates. In case of unsecured personal loans as there are no collaterals attached to it, borrower may not repay back. Lenders lose money then. For lenders unsecured loans are risky while for borrower it is not. This is the reason lenders doesn’t provide big loan amounts. Apart from that they also need to verify all the credit reports and employment information of the borrower to ensure the borrower has the capability to pay back the sum. With low credit score loan amount also reduces.

 

2.      Interest Rates are Higher

 

As there are no collateral or guarantor is involved with these loans lenders stay at the risk of losing money if the borrower fails to pay or simply doesn’t pay. It makes the lenders lose huge sum. The risk factor is the reason that these lenders of unsecured personal loans charge a huge interest compared to the secured loans.

Lenders can also hide out a big portion of the high interest rate which they take in disguise of loan application or loan origination fee. With higher interest rates the amount to be repaid also gets higher for you.

Getting an unsecured loan is definitely very simple and also risk free for the borrowers. There is no hassle from the side of borrowers as their properties are not at stake. But one must not nod away the fact that these loans come with higher interest rates even for a small amount as a loan. It makes these products much expensive then the secured loans.

Take time to make decision before taking a loan and consider the facts and understand if it can serve your goals.

 

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Created on Jul 24th 2018 03:06. Viewed 586 times.

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