Loans are generally available in two forms: secured and unsecured loans. Unsecured loans are also known as non secured loans. Let’s find out a little more about them. When in need of financing, but there is no asset to be used as collateral, non secured loans could provide a solution. The funds provided can be used as desired: to purchase new furniture, electronics, for home improvements, personal projects or to consolidate other existing debts. Even though collateral is not required, the borrower must present financial credibility to have his application approved. Non secured loans are often known as signature loans, because all the lender has is a signature on a piece of paper. This signature however is as a guarantee to respect the agreement. The loan is not granted until the financial institution is convinced the applicant possesses good financial management and is trustworthy. The lender takes cautions against loosing its investment by cautiously analyzing the application. The elements under supervise are: the credit history, credit rating, employment condition, income, economy accounts and the existence of any other obligations. These features help the lender calculate an application score, which decides whether the applicant is likely or not to repay the loan as agreed. A score below the limit gets the application rejected. If the application gets a good score and the loan is accepted, the borrower must be aware of the following matters: non secured loans bring high risk upon the financial institution, therefor they are more expensive compared to secured loans. Increased cost can be found in the interest rates, as well as more rigid terms. The lack of collateral limits the amounts granted to $15-20k, on periods as long as 10 years. Maintaining a good credit rating increases your chances of obtaining lower rates. Previous business with a chosen lender can also contribute to lower costs, if all went well and trust has been established. People with damaged credit have the alternative of bank secured loans. If there are no properties to secure the loan, they can apply for a bad credit personal loan, but this can prove to be very expensive, so this type of loan should be the last choice. Although non secured loans do not have restrictions upon their destination, it is counseled to spend the money in a responsible manner. Do not use the cash provided to finance a lifestyle otherwise unaffordable. Non secured loans do not present any repossession risks for the applicant, but the financial institution can take legal measures to regain losses if repayment goes ill. Defaulting will also reflect on credit rating, making future loans more expensive and less accessible.
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