Advantages and disadvantages of unsecured loans
When you decide to shop for a personal loan, it is not the same as going to the mall and shopping in the supermarket. To get the best possible deal, there are several factors you have to consider.
Before you venture out to decide which personal loan to apply for, here are some questions you should ask yourself.
- Do you know how much money you need? Ascertain just how much money you need, and whether you will be able to pay it back effectively.
- What is the time frame you will need to repay the loan? Decide how quickly you would like to pay the loan back. Once you have come to a decision, determine how much you will have to pay monthly, and what the full total of the loan will be.
- Are you prepared to put down collateral? If you decide to take a secured loan, such as that for buying a home, will you offer it as security for the loan? The same applies if you purchase a motor vehicle, or any asset you may put up as collateral. If you miss loan repayments, your lender can seize your property, car, or anything else that was offered as security for a specific loan.
Advantages of an unsecured loan.
There are many advantages when you opt for an unsecured loan, especially if you’re in need of urgent funds. Many lenders also offer to consolidate all your debts under one umbrella, so that you pay only and one lender.
Here are some advantages.
- No collateral is necessary. Unsecured loans do not require that you put any of your assets at risk. If things do fall apart, there is little chance that you will lose any of your assets.
- Some loans can take a while to be approved. With an unsecured loan, some lenders offer an approval and funds within 24 to 48 hours. If there is an emergency situation, this is a huge advantage.
- An unsecured loan can be more accommodating. Your final approval may be delayed due to some factors in your application. However, lenders of unsecured loans tend to have some leeway. For example, you might need a set amount for a specific reason, and lenders will take this into account when evaluating your approval.
Disadvantages regarding unsecured loans.
- Unsecured loans have higher interest charges than secured loans. This is because there is no collateral and the lender takes all the risk.
- Secured loans are available in much larger amounts and the interest rates are lower because of the security offered. That why it is necessary to shop around for the best terms on an unsecured loan.
- Personal loans that are not supported by collateral are smaller. If you want access to a large amount of money, you would be better off with a secured loan.
- If you require a fairly large of amount of funds, a secured loan will be the best way to go, approval for unsecured loans usually commit to smaller loan amounts.
If you are in a hurry for funds, although the interest rates may be higher, an unsecured loan would be the best. A secured personal loan may be a better be in some instances, but you would have to provide collateral.