The differences between secured and unsecured loans and their respective advantages and disadvantages have been widely discussed. This article does not focus on that. Our goal is to put together an easy, first-hand guide to unsecured loans without having to go into obvious terminology or explanations.

What to expect in terms of qualification

It’s common to believe that only people with bad credit or non-homeowners apply for unsecured loans, but this is a misconception. Actually, anyone can apply for a loan like this. The thing is, if you have a good credit history and score and own a property, his options will be broader (including secured and unsecured loans), that’s all. I believe there are no real limitations when it comes to qualifying and getting approved for an unsecured loan. It’s just a matter of finding the right lender. A kind of “being in the right place at the right time” and, of course, lots and lots of research.

Your monthly income and ability to pay will determine your eligibility. Unemployed people will find it more difficult to obtain unsecured financing, but a good credit score may help. If this is not your case, then your chances of approval will be slim, but keep in mind that there are always kind souls willing to lend you a hand, never give up your search.

Applicants will need to provide the lender with proof of income and some lenders will even conduct background and credit checks on applicants. Be sure to ask the lender if they will run a credit check on your report, as it can lower your credit score if you are not approved for the loan. If a lending institution asks for your social security number, a credit inquiry is likely to follow.

Average Unsecured Loan Term

Unsecured loans can provide the borrower with a sum of money ranging from $1,000 to $25,000. A regular repayment period will range from 6 months to 10 years.

The risk assumed by the lender

Since this loan is not secured against collateral (unlike secured loans), the lender takes significant risks. As a result of this, interest rates on unsecured loans are typically higher than on any other type of loan.

Also, if you miss a payment, or even if this payment is just late, the lender could take harsh action due to the uncertainty of the loan. There is usually a lack of tolerance when it comes to late payments and some lenders may even take you to court quickly.

Unsecured Loan Purposes

There is no limit to the use you can give the loan. That’s the beauty of it, as long as it’s not dodgy or illegal, you’re free to do what you want with the money, you set the limits!

Another advantage

As you well know, this type of loan is free of guarantees. When it comes time to apply, unsecured loans are usually granted in a short period of time. Quick approval is one of the trademark features of this type of loan.

Whether you’re a non-homeowner, a renter, or a homeowner who doesn’t want to put their property on the line, there’s an unsecured loan waiting for you!