June 2024

Different types of unsecured loan


Unsecured loan is the most common and preferred type of loan among customers. Unsecured loan is supported and issued only on your credit worthiness and reputation, instead of supported by any type of security or collateral like other loans. Unsecured loan is also known as personal loan or signature loan. Unsecured loan does not require any collateral, like property, assets, car or some valuables, to pledge as security.

Unsecured loan is approved on the base of a borrower’s credit score and for certain loans, high credit score is the requirement of lending companies. Good to high credit score shows that borrower is capable of paying off loan with responsibility and reliable for unsecured loan.

Unsecured loan becomes risky for lenders as there is no security and lenders charge high interest rates and require high credit score to qualify for loan.

Unsecured loans can be used to provide money for any financial need such as debt consolidation, student loan or business loan. This loan can be use in emergencies needs such as pay auto repair bill, medical bills, home improvement and wedding expenses or to expand small business.

Getting unsecured loans online is quite simple, easy and quick procedure for loans. This procedure can be done easily through a laptop or computer having internet connection. If you are in urgent need of cash, which is in most of the cases, you may get loan within days. Now you have wide range of loan options and you can search online loans with various interest rates and offers which suit your financial situation, get quotes and complete the application process through your tablets or computers in the comfort of your house or office. You can see what amount they offer you, small or large.

The lenders look at your credit history, personal details and your monthly income to judge your credibility to pay back loan by due date. You should discuss everything with the lenders before signing the loan contract.

Types of unsecured loan:

Revolving loan

A loan that comes with credit limit which can be used and repaid and then used again is called revolving loan. Credit card and personal line of credit are its example.

Term loan

In this type of loan, the borrower has to pay off loan in installments till the due term ends. This type of loan is associated with both secured and unsecured loans.

Consolidation loan

You can pay credit cards or signature loan through consolidating debt. You can consolidate your bills in one monthly payment.

Read more: How Can Home Construction Loans Help Pay the Bills?

Most of people like to get unsecured loan because you do not have to offer some valuable for collateral. You may not want to risk your property or car or you may not want to disclose your valuables, but you can still get loan for your needs.

Read more: Knowing the Charges Associated with Home Loan

Unsecured loan is also known as signature loan or good faith loan, because borrower can get qualified for loan by merely signing loan contract. A person having not sufficient credit or bad credit can get unsecured loan when someone agree to give guaranty, is called co-signer loan.

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