What if you could enjoy all the benefits of credit without being tied down?
Many people who need to borrow money use a secured loan to get it. But this means putting things like cars and homes up for collateral.
Meanwhile, an unsecured personal loan offers the money you need without you putting anything at risk. Want to learn more? Keep reading to discover the benefits of unsecured personal loans!
We’ve put together a comprehensive guide to the many benefits of unsecured loans. Before we dive in, though, it’s important to define exactly what kinds of loans we are talking about.
Basically, an unsecured personal loan does not require you to put up anything valuable as collateral. Instead, you are given a loan based on your perceived ability to pay the loan back.
Accordingly, the bank or another lender will look at your credit score. Other factors may include things like your income or current assets.
Conversely, a secured credit loan involves putting valuable property up as collateral for the loan. This can be useful for people who might not otherwise qualify for the amount of money they need.
Unfortunately, there are some very specific disadvantages when it comes to secured loans.
First of all, secured loans are typically limited to the value of the collateral. And this can open up multiple problems for the borrower.
First, you may need to borrow more than your collateral is worth. This may force you to put multiple items up for collateral. Alternatively, you may feel forced to put up something more valuable than you want to risk (such as your home).
Speaking of risk, your collateral is perpetually at risk. If you cannot pay back the amount of money you borrowed (with interest), then the lender may seize the property. This means a failed business venture could possibly cost you your car or even your home.
If you’re worried about secured loans, then unsecured loans may be the best alternative. Here are some of the main advantages that unsecured loans offer for the borrower.
The first advantage of an unsecured personal loan is a little obvious. In fact, it’s right there in the name!
Because these loans are “unsecured,” you do not have to put up any collateral first. This means that you don’t have to worry about losing any valuable assets used as collateral if you encounter financial difficulties.
Now, this can sometimes be its own double-edged sword. You may not be at risk of losing your home, but without collateral, you may be stuck paying off a loan for many years.
Ultimately, though, we’d rather be stuck with a roof over our heads than without one!
Once upon a time, getting a loan meant going to the bank. They were basically the only game in town for borrowing money.
Now, you have many options for things like personal loans. And this serves to make the entire application process easier than it was before.
You can apply for loans from a number of online lenders now. And while this does include more traditional lenders, it also includes newer options such as peer-to-peer lending.
What does this mean for you? Simple: you can apply for an unsecured loan from the comfort of your own home. This is rarely the case with secured loans because of all the paperwork that is involved.
The last big advantage ties into your ability to get an unsecured loan in the first place. Namely, your good credit score!
Those who get secured loans are going to face a lot of limitations. They must find borrowers who not only offer secured loans but are willing to take the form of collateral that they have to offer.
Someone with good credit, though, can get an unsecured loan from any lender in town. And, as we discussed before, any lender online as well.
Not only is having options nice, but it gives you a lot more power as a borrower. Basically, you can afford to “shop around” and find the lowest possible interest rates before taking out a loan!
So far, we have focused almost exclusively on the benefits of using unsecured loans. That leaves an obvious question: are there any disadvantages of using unsecured loans?
The obvious downside is the credit requirement for these loans. Such requirements make it difficult for those with bad credit or young credit to obtain the money they need.
Another potential downside is the interest rate. While you are able to shop around for better rates (as we mentioned above), the truth is that secured loans still tend to have lower interest rates.
In our opinion, these two disadvantages are not major dealbreakers when you need to borrow money. Still, it’s worth understanding what your options are when it comes to getting money!
There are many advantages to using unsecured loans. But what if you need to have additional money available on a regular basis?
Depending on your exact needs, a credit card may be more useful than a loan. And it’s still possible for those with poor credit or young credit to obtain an unsecured credit for maximum financial flexibility.
Like we said before, there are now a number of online lenders that make it easy and convenient to apply for the money that you need. And Bonsai Finance is one of the best names in the business when it comes to credit cards!
It’s up to you whether you need loans, credit cards, or both. It’s just important to understand all of your options.
Now you know more about the benefits of getting an unsecured personal loan. But do you know where you can find more money news you can use?
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