In our current economy, financial difficulties are all too frequent for loads of people. Financial troubles often begin once an individual’s expenses surpass their income. If used correctly – personal loans can help with such a dire situation.
If you are deliberating applying for an unsecured personal loan, you should do research and study the distinctions between secured and unsecured loans.
Secured Personal Loans:
When opting for a secured personal loan – one will have a prolonged repayment period and your monthly payments will almost surely be lower. When compared to an unsecured personal loan, it is more cost effective, since the interest rate will be far lower. In order to apply for a secured loan – you will need to supply some form of collateral, such as a car, house or other asset – so as to secure the loan. By doing this, the lender has a lower risk level, and therefore it’s far easier to obtain a secured personal loan, compared to an unsecured loan.
Unsecured Personal Loans:
Unsecured personal loans are basically the polar opposite of secured loans. With this loan option, no collateral is supporting the lent money; therefore the interest rate is increased. To the lender, unsecured loan are a riskier option and therefore, the credit worthiness of the debtor must be analysed. An unsecured personal loan is an great alternative for people that need a loan, but don’t have assets to provide as collateral to the lender.
Lenders are often understandably cautious to lend massive amounts of money under these terms. If a payment default occurs, the lender’s only option to reclaim their money is through the legal system.
Advantages of an Unsecured Personal Loan:
When applying for any unsecured loan, there are a few points to consider. One is that these loans have higher interest rates than secured loans. Then again, for some individuals – the benefits outweigh the risks. Since no collateral is required, the borrower doesn’t have to pledge assets in order to obtain a loan approval. A further convenience of using this type of loans is that you don’t have to obtain tax return and different financial statements; consequently less paper work is needed.
Personal Loan with Bad Credit Score:
Most borrowers these days opt for the unsecured personal loan, because it eliminates the lengthy process and paperwork required to apply for a bad credit personal loan. Alternatively, some borrowers choose secured personal loans, with lower interest rates. The application process can easily seem overwhelming, but the task becomes a lot easier once you know what your options are.
These loans are easy for almost anyone to get, and no matter what your credit score is – you should still qualify for at least a small loan amount. You can even have the money deposited into your checking account within the same day. Good luck and happy loan hunting.
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This article was written by financial expert, ScribeZA, for a top South African personal loans provider.