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.

Unsecured personal loans don’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.  The lack of a collateral requirement is what differentiates unsecured loans from secured loans.  Unsecured personal loans are a good option for those with bad or no credit, and if used responsibly can actually improve your credit score.

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 principal balances are usually smaller than 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.  That doesn’t mean unsecured loans aren’t a good option, however.  There are many positives to short term personal or unsecured loans- for instance they’re often the best option for bad credit loans.

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.  Loans for bad credit do exist, but be prepared for higher rates until your credit score is improved.  Taking out unsecured loans to consolidate debt is a viable option for credit score improvement, as rates on personal loans are typically lower than credit card debt rates.  Make sure you treat loans for bad credit responsibly however, because missing payments on anything will hurt your credit score and make it more difficult to obtain a loan now.

Get an Unsecured Personal Loan Now

Does an unsecured loan sound like the right choice for you? Loans now is here to help you navigate the world of personal lending, from deciding what type of loan is best for you, to matching you with the lender that’s right for you.There are different types of loans for all levels of credit and income, and working with a lending specialist from Loans Now may help you to determine which unsecured loan is right for you.