Unsecured Loans

(Author: spivey003 | Article Views: 26 | Word Count: 514 | Published: Mar 29th 2008)

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There are number of people around the world whose financial condition is fragile. Their desires remain unaccomplished due to funds requirement. Under these circumstances, one cannot attain real happiness. An unsecured loan is a loan without security and it is the ideal option to meet the abundant needs. Unsecured loan is a type of personal loan where the borrower is not required to surrender any security for availing the loan. However, the interest rate is very high on unsecured loans as no security is asked by the lender. The lender prescribes tough conditions and leaves no stone unturned in order to get the money back. Lender undertakes the risk of absence of security. These types of loans are very fast to get and least paper work involved. Unsecured loans can be taken for any personal reasons such as home improvement, purchase of a car, family ceremonies etc., thus become a multi purpose loan. As the tenure of unsecured loan is very short, it is better to avoid bigger amount as loan more than requirement.

As the name indicates, unsecured loans are approved and sanctioned without any security against the loan. No collateral security is offered against funding of financial catastrophe. It is preferred by tenants, house owners, salaried people and self employed people. People with bad credit, bankrupt, unpaid debt too avail these loans, if they have good repayment capacity. Of course, the quantum of loan depends upon the income and repayment capacity of the borrower. Unsecured loans are the best for those who do not have any property to offer as security or those who don’t want to offer their property as collateral security. Unsecured loans are swift loans because there is no property valuation, no legal formalities, no paper work, no delay in sanction and no delay in transfer of cash. The borrower need not worry about the security. Unsecured loan is preferred for short period, as secured loan takes long to time to get it approved. Though unsecured loans are risky, lenders offer unsecured loans in order to target more borrowers, as loan market is flooded with too many lenders. Unsecured loans are the last option as the interest rate is very high. The borrower has to take a careful decision on unsecured loans after comparing the rate of interest offered by different lenders. Unsecured loan has the limitation of loan amount as no security is offered. In the case of secured loans the loan amount will be up to the asset mortgaged. Unsecured loans are always a burden on the lender as there is no possession of property in the case of default. Though the lender charges heavy interest on unsecured loans, this can off set only a certain portion in case of default by the borrower. If repayment of unsecured loan is linked with the salary, then the lender has the cushion of safety of funds. Barring one or two adversaries, unsecured loans are very good and timely from the borrowers’ point of view, as their requirement is fulfilled without any hassle such as delay, collateral security etc.

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