Unsecured loans are a type of loan that doesn't require any collateral. Instead, these types of loans rely on the borrower's creditworthiness to get approved. Unsecured loans are offered by many different lenders and offer a variety of benefits including lower interest rates and flexible payment terms. In this blog post, we'll go over all you need to know about unsecured loans so that you can decide if it's the right option for your needs or not!
Unsecured loans are approved without the use of property or other assets as collateral. The terms of these loans, including approval and receipt, are most often contingent on a borrower’s credit score. Typically, borrowers must have high credit scores to be approved for unsecured loans. Unsecured loans may also be referred to as signature loans or personal loans because they require little more than your word that you will repay them from future income or savings in order to get financing with no equity requirement (no need for any type of collateral).
The terms of these loans, including approval and receipt, are most often contingent on a borrower’s credit score. Typically, borrowers must have high credit scores to be approved for unsecured loans. For the lender's protection against potential defaults by the consumer (borrower), many unsecured loan agreements stipulate that if payments are missed or defaulted on by the borrower, they may have their wages garnished or be subject to other legal proceedings.
Unsecure loans can be personal loans, student loans, or credit cards.
A line of credit is a loan that has the potential to be spent, repaid, and spent again. Credit cards and personal lines of credit are examples of revolving unsecured loans.
A term loan is a type of loan that has a long, predetermined repayment schedule. While most loans of this type are secured by collateral, there are also unsecured loans with the same terms. The difference between an unsecured term loan and its secured counterpart comes down to what form it takes: either from a lender directly or through credit cards