What is an Unsecured Loan?

Unsecured Personal Loans

The terms and conditions for an unsecured loan vary from lending company to lending company. It is a loan a borrower obtains entirely on his or her creditworthiness, which is the consideration given to a borrower’s likeliness to repay a loan. Some lending companies, depending on the unsecured loan amount and borrower’s creditworthiness, require borrowers to include a co-borrower in his or her application process. A co-borrower is a person that promises to either make the required monthly loan payments or repay the entire loan in the event the primary borrower is unable to fulfill the obligation.

An unsecured loan doesn’t require a borrower or co-borrower to provide any collateral to obtain the loan, which is a form of property pledged to secure or guarantee the fulfillment of the financial obligation. What is and isn’t considered an acceptable form of collateral for a loan varies between lending companies; typical forms of collateral used to obtain loans are real estate, cars, and stocks and bonds.

Loans and Credit Checks

Depending on a borrower’s income and creditworthiness an unsecured loan can be significantly large; many tens of thousands of dollars. However, their principle balances are usually smaller then secured loans. Because collateral and lenders do not back them and consider them riskier than secured loans, they are priced differently and have a higher interest rate.

Lenders make the conveniences and flexibility of unsecured loans available to borrowers with bad or poor credit by altering the loan offer’s terms: reducing the possible loan amount, shortening the term – length of the loan, and charging a higher interests rate.

Get a Personal Loan Now

Working with a lending specialist Loans Now may help you to determine what unsecured loan is right for you.