If a bank were to offer you a loan and not require any security from you, it would be a surprise indeed. However, the unsecured loans of today have brought in many new options for all kinds of borrowers. As the name suggests, an unsecured loan needs no surety or collateral to be pledged with the bank. In case of a secured loan, the borrower will be asked to use his property or house as collateral while borrowing the money. Homes are most commonly used as collateral because if a person has a house, his/her credit background is likely to be strong. In such a case, the repayment will not be a hassle for the bank. Most lending institutions after all have to look after their own interests. They are not in the business of lending money to people out of the goodness of their hearts. The act of lending in the world of today is business, pure and simple.
Most of the time, people who opt for unsecured loans are those who do not have collateral. What this means is that they do not possess a house or any other suitable asset. However, this is not to say that property owners are always ready to avail of loans against the security of their homes. While this may allow borrowers to avail of lower rates of interest, it does put their assets at risk. An unsecured loan is definitely more beneficial for the borrower than a secured loan because the risk factor here is less. This is because the borrower need not put up any collateral. However, the loan also has a stipulated time frame within which it needs to be repaid. The time taken between applying for a loan and getting it sanctioned is also less as formalities like the verification of property are absent. The people who borrow money using the unsecured mode of loans generally apply because of some desperate need. Hence, most often, these borrowers put the money to good use instantly.
In many cases, unsecured loans are availed of to buy furniture or to redo the interiors of a house. Several borrowers use these for the repayment of any debts that have been pending for a while. Whether one is looking to buy a new car or make one’s huge debt burden somewhat more manageable, an unsecured loan might provide a way out. In many countries, unsecured loans are referred to as personal loans. These can be used for any purpose by the borrower. In most cases, these loans are used to add value to the lives of the people who avail of them. Since the rate of interest is moderate to high, repayment is planned out and the lender chalks out a plan through which the borrower can make repayments over a period of many years. This varies from case to case depending on the value of the loan and duration required to close the loan. At the time of securing the loan, the borrower and the lender come to an understanding based on the promise made by the borrower to repay the sum without default or delay.
Get more stuff like this
Subscribe to our mailing list and get interesting stuff and updates to your email inbox.
Thank you for subscribing.
Something went wrong.