Unsecured Personal Loans Vs. the Secured Loans
There are various types of loans that include both secured and unsecured. A secured loan is that which is backed by collateral. For example, a mortgage loan or auto financing where the lender will mark lien or hold the asset documents as security. While on the other hand, when there is no guarantee or support behind a loan, then it is known as an unsecured loan. These unsecured loans are granted based on the creditworthiness of the borrower, and the financial institutions always considered the credit ratings of the applicant to avoid disbursing unsecured loans to someone who has a history of defaults or late payments.
Types of Personal Loan
An unsecured loan can come in many forms. Some of the common types include credit cards, cash loans, or instant cash. Usually, you will have to apply for the unsecured loan, and if your request gets approved, you will get the sanction of the loan, with the terms of repayment and the tenure where you have to make the whole repayment every month. Unlike secured loans, the unsecured loans will always carry a higher interest rate. Financial institutions take a risk by releasing funds to a person without holding any security, so they charge a higher interest rate.
The Options for Unsecured Loans
The best option to get the loan is from a bank. Banks have a system in place that guarantees the confidentiality of the borrower and offers a professional approach to managing the whole loan process. However, many people may struggle to deal with the bank as they are strict with their requirements. It is challenging to get loans as the banking lenders are getting more cautious of those people who are not able to return the lent money. Also, the whole process of applying with a bank can take time, and if you are in urgent need of a loan, the banking channel will not serve your purpose.
The other option to get a personal loan is to go to third party lenders and financial services. These services can provide you with a cash loan, instant loan, and online loan options. They require simple checks such as identity verification and credit rating, and they can disburse an unsecured loan in a few hours. However, these lenders will provide unsecured loans for a small amount ranging from $200 to $1000. For anything over this, you will have to head over to a proper banking channel.