Tuesday, May 27, 2014

Get a Hold on Your Finances With Unsecured Loans

We feel the need of taking a loan for various reasons - a new car, holiday abroad, home improvements, prolonged illness, just to name a few! We may however not be able to put up collateral to get funds. Most borrowers prefer to take unsecured loans for smaller amounts. As the name suggests, unsecured loans are loans that are given out to borrowers without necessitating them to put up any collateral. As such, unsecured loans are difficult to obtain due to absence of collateral. Banks and financial institutions take into account number of factors before granting unsecured loans to borrowers. If you are on the lookout for an unsecured loan for your business, the loan approval process may take a bit longer.

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Unsecured loans require you to pay huge interest rates due to lack of security. When you approach a bank for a loan, you need to ask about APR or the annual percentage rate being offered. This rate is nothing but the payable rate of interest that is usually calculated after evaluating your credit history. You may go for unsecured loans that are available on a fixed rate of interest so that the payable amount remains constant all throughout the tenure of the loan. Having a fixed rate of interest makes a lot of sense since interest rates are rising at alarming rates and you certainly do not want to see your monthly repayment increase year after year.

Unsecured loan rates also change as per the credit score of a borrower. Lack of collateral and poor credit score makes a very bad combination and often causes problems in getting the loan approved. This does not mean that bad credit holders do not stand a chance in the unsecured loan market. They can certainly get unsecured loans but the rates of interest would be very high and the repayment tenure is often very short. The loan tenure for unsecured loans is usually between one to ten years though it tends to vary from one financial institution to another.

You need to choose a lender carefully, as there are companies that claim to offer the cheapest rates but have so many hidden charges that you would end up paying much more than you actually borrowed. Conventional banks would be your best bet if you are looking for lowest rates. They however take longer time for loan processing, have stringent conditions, and avoid dealing with bad credit holders. Fast cash lenders on the other hand are willing to take the risk but levy exorbitant rates of interest on the loan amount.

Before you venture in to shopping for unsecured loans, do your homework - know the exact amount you would require and what you want in a personal loan. For instance, your priority may be lower rates and it wouldn't really matter if you had to repay the loan in just a couple of years. On the other hand, there could be others who are keen on lower monthly repayments and do not care how long it takes for the loan tenure to get over.

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