Unsecured Loans

unsecured-loan The type of loan which does not require any security proof such as liability or equity is called an unsecured loan. Such credits usually have more expensive interest rates because they bear more risk for the lender. The amount of money is also smaller and has to be returned in less time compared to a secured loan.

In the case of a credit card, an unsecured credit limits the amount of money which can be borrowed on the credit card. For example, the maximum limit of a loan on the credit card can be 1000 USD. There can be obtained more loans of smaller sums. The condition, however, is that they don’t add up to exceed the imposed limit.

Unsecured lines of credit have multiple purposes: either personal use or to pay off a debt. It can prove a good solution in case of emergency, when not much money is needed in a hurry. A major advantage is that such loans can be obtained quickly, in only a couple of days.

Unsecured loans are also used to consolidate a credit card debt. This means that all the debts added on a credit card can be put under one loan. It is easier to be paid off due to lower rates of interest. This type of loan also helps to better administrate one’s finances, when only one payment needs to be done monthly, instead of several at different dates.

A type of unsecured loan that is usually taken is the personal loan. It doesn’t involve large amounts of money and the returning period is fairly short. In order to obtain such a loan, one needs to provide information concerning the job earnings and personal assets owed. Because the risk for the creditor is rather high, the interest rates are higher, as well.

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