Which Unsecured Personal Loan is Right for You? A Short Guide
Increasing financial obligations will once in a while force you to look for additional sources of money. Even with the most prudent spending, you will find that your savings might not be enough to help you access enough money to finance your lifestyle. As the cost of living goes up, you might need a loan to boost your income in order to live comfortably.
Using an Unsecured Personal Loan
Whether you want to invest or cater for household expenses, an unsecured personal loan will go a long way. If you have been looking for a quick way to boost your income, it is time to consider this financing option. Like with any financial product in the market, it is important to understand the basics of this type of loan.
Like the name implies, you don’t need any collateral or property to secure this loan. There are no guarantees needed before approval unlike in the case of a secured loan. In most cases, you just have to prove that you can repay the loan, which means you should have a steady flow of income. This type of loan is less risky for you as a borrower because if you are unable to repay, you just need to renegotiate with the lender.
There is no asset to lose in case of default but while this sounds like a good deal, you will have to pay higher interest rates for a secured loan because the lender is taking a big risk. Your credit rating should also be perfect though there are still some lenders who offer loans tailor-made for consumers with bad credit.
Types of Unsecured Loans
There are different financial products in the market as seen below. Your choice will depend on your financial needs, which means you have to evaluate what you actually need before opting for any of the available products. Here are some of the common unsecured loans in the market:
Credit card loans: When you buy a credit card, you are basically taking a loan based on your income flow. That’s the reason thereisacredit limit on how much you can spend. This loan is unique because there is no lump sum provided, but you will borrow when need arises. Whether you are withdrawing cash or shopping with your card, this is basically an unsecured loan thatis very easy to access.
Signature loans: These are also popular unsecured loans thatcan be procured from your bank or credit union. If you have a steady monthly income,a signature loan is ideal as you will get a lump sum repayable in fixed monthly installment. Whether you want to buy a car or renovate your home, these loans can be used for any purpose.
Peer to peer loans: With the advent of online borrowing, there are platforms that connect borrowers with private individuals who have the ability to lend. The lenders will review your case and in case one has the cash you need, an agreement is signed and you will get the cash repayable in fixed installments.
Of course, there are other variations of unsecured personal loans including student loans and you should talk to your bank to get a customized financial product. Whatever you do, make sure you repay your loan faithfully.
Tim Clarkson is a financial advisor with over 17 years in the industry. He is an unsecured personal loan consultant based in New York. Tim also writes on topical industry issues. Visit his blog here for more information.