Sunday, May 11, 2014

Figuring Out If You Should Take An Unsecured Personal Loan

The two most usual forms of unsecured personal loans are credit cards and payday or cash advance loans. Many do not recognize credit cards as loan instruments, but that is what they are. The card issuer lends you money to pay for goods or services. Credit cards and personal loans are available to many because the underwriting standards are quite flexible.

Consider the advantages and disadvantages of credit cards.

Credit cards can be found with very low interest rates, sometimes even 0%. And by using them you can gain a variety of benefits such as cash back, flying miles, or merchandise rewards. However, missed or late payments, or going over the credit limit can incur rather heavy fees. Of course, to get one you must have an acceptable credit history and gainful employment and meeting a salary benchmark.

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Credit cards are easy to use, they can have reasonable rates if you watch yourself, and they do offer rewards for usage. Sometimes interest rates can become quite high and fees can become usurious. Credit cards have become a standard and important financial tool for most every adult. They must be used responsibly and paid off whenever possible. Students, families, the elderly and professionals should probably have one at any rate.

Consider the advantages and disadvantages of cash advance loans.

These loans usually do not require a credit check and no signing over of collateral or valuable property to secure the loan. Since these loans represent a high risk to the lender, the interest rates tend to be rather high. Because of the high interest rates and high fees, sometimes borrowers can trapped in a destructive cycle of refinancing the loans.

These loans can have funds in an individual bank account within a matter of hours. In a perfect world, no one should really avail themselves of such loans. If an unexpected or urgent need for cash arises, they can be life saver if they are paid off within the terms of the contracts. Otherwise they should be avoided.

Consider the advantages and disadvantages of bank loans.

Banks, credit unions and other traditional lenders offer low interest rates and funds are easily transferred to bank accounts. While these lenders do offer unsecured personal loans, it is very difficult to qualify. Only those with exceptional credit histories, decent income, and a history with the bank are usually all who can avail themselves of these loans.

Consider the advantages and disadvantages of private finance loans.

If you are a qualified borrower who needs a larger unsecured personal loan, say $250,000, these firms can make their decisions based more upon the personal situation of the borrower. They do have high qualifying standards, interest rates can be high, and sometimes the repayment terms are not structured in the most comfortable way. These loans are primarily for those with a unique need or circumstance.

Consider the advantages and disadvantages of peer to peer lending.

This is a new trend in the sphere of finance and may offer a prodigious lending alternative. Markets such as Prosper create a place wherein people can post requests for loans and groups of small investors can gather to fund them. These tend to offer fast turnaround. And, you are paying interest to singular folks rather than large corporations or banks. Interest rates can be as high as 34%. And some of the market places charge fees to both borrowers and investors.

Before taking any unsecured loan, it is incumbent on borrowers to thoroughly check the venue and educate themselves to they do not fall prey to scamsters.

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