About non secured loans

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Lending money is one of the oldest businesses in the mankind history after barter. Loans are basically of two types - secured loans and unsecured loans. Unsecured loans are also popularly known as non secured loans. As the name suggests, non secured loans are loans against which the lender does not keep any security. These types of loans are unlike secured loans where the borrower has to keep some kind of collateral or asset with the lender as security. This collateral can be in the form of a property, car, jewelry etc.

In unsecured loans, the lender basically trusts the borrower that he will return his money with interest. This trust usually comes because of the past credit history of the borrower. There is no security attached to this loan therefore it is riskier to the lender as compared to a secured loan. In case the borrower defaults on the payment back to the lender, the lender will have to spend a lot of time and effort to get the payment back. A very simple example for a non secured loan is your usage of credit card. When you use your credit card to make a payment at a shopping center, the credit card company is actually giving you a credit for that amount which you are supposed to pay back within a particular time frame.

Who can get a non secured loan?

Not everyone would be eligible for non secured loans due to the risk involved to the creditor. Therefore creditor or lender will obviously have some screening mechanism before approving the loan application. A few common points which always come under consideration are:

The borrower should be working full time

He should be in the job for at least one year

He should have a decent credit history with no defaults

He should have an active bank account

He should be living in the same house for specific duration of time.

In case, the applicant is not able to fulfill all the requirements above, he may have to pay a penalty in the form of high interest rates. Please note this is just a common criterion. The actual eligibility will depend on loan type and applicant's financial health.

What are the features of an unsecured loan?

Main features of non secured loans are:

Relatively higher interest rates as compared to secured loans
No security or collateral involved
Can be taken for any purpose whether personal or business related.
Tenure of repayment is mutually agreed and can be up to 25 years
Lender may reduce interest rate if the borrower pays all the installments on time
Usually, non secured loans are given up to $15000 but it may vary depending upon profile of applicant and loan type.

Should you apply for a non secured loan?

There is no clear answer to this question. It depends on your financial situation and your need. As a general thumb rule, it should be taken only for emergency situations like medical emergencies, educational purposes, funeral expenses etc. It should be avoided for non important purposes like home improvement or overseas vacations.

Where to get the non secured loans?

It is always a good idea to check with your local bank or credit union first. Since they know you and know your credit history, they should be able to grant you the loan with minimum fuss. But probably the easiest way is to apply for non secured loans on the internet. You can get the provision of accessing various creditors simultaneously, get interest rate quotes, terms and conditions etc without even going out of your home.