Have you ever thought of a personal loan to get yourself out of a problem, sort your financial situation, or treat yourself to a memorable adventure holiday of a lifetime?
What are personal loans most commonly used for? They can be used for many things. Consolidation of debt is a reason a lot of people apply for personal credit. It can be a good idea to have a single fixed monthly fee and not a few spread across varying lenders. Buying a new car or repairing an older model or even a family holiday are all reasons people apply for credit.
Is lending a new concept? Not at all, the idea of lending has been seen for many hundreds of years. Silk merchants, wool merchants or farmers would have all been using this type of arrangement for buying and selling goods. Even before this the Greeks and Romans would have been lending monies to each other.
What is an unsecured loan? An agreement of this type is where money is given from a lender to a client at a fixed rate, this is also known as a debt. First of all there is a first applying process and an agreement between both parties formed. The money is given without any security from the applicant, which could be in the form of a car or house.
Types of unsecured personal lending can be credit cards and student debt. There is another form of unsecured credit and this is known as a revolving loan, this is when there is an agreement to an amount of money which has an upper credit limit. Over time this credit can be paid off and spent again to the most limit. Store cards are a good example.
What is the difference between unsecured and secured? The applicant would put a high value security item against the debt in the form of a car or house. If they then fall behind with any payments known as ‘defaulting’ the lender can have grounds to seek the payment through the security given by the applicant, an example is that they could make the client sell their car to recoup any missing payment or payments.
Unsecured has its benefits, that you do not have to put up security is a big incentive, the risk of losing your home or car if you miss a payment with a secured type agreement is big enough reason why people choose this type of personal agreement. It will not always come to this but the thought of it is enough for some people.
Why would I chose secured? Because the lender does not have any security against the money they are lending the big disadvantage is that the percentage rate of the finance being given is usually considerably higher than that of a secured loan. This is because the lender is taking a bigger risk if anything went wrong. For example; a late payment or a non-payment of any monthly agreed fee.
To make things safer the law states that a firm is not allowed to lend you any forms of credit until the first is totally paid off with them, this includes the interest charge on the whole amount. This is a safe guard that stops people applying for more than they can afford to pay back and ultimately creating too much debt that they cannot pay it off.
By far one of the best pieces of advice come from the experts themselves and that is to make sure you choose a reputable online lender for your unsecured personal loan. Just ask the question before going ahead with the agreement.