Thursday, May 1, 2014

Unsecured Personal Loans - Who Should Borrow

Unsecured personal loans take many forms, the two most common types of unsecured personal loans are credit cards (revolving lines of credit) and Payday loans (One time loans). They can for many be ideal due the loose underwriting standards and flexibility of terms.

Personal unsecured loans should not be confused as 'free money' since a lot of times they require a personal guarantee and(or) credit check.

Credit Cards

Credit cards can have interest rates as low as 0% along with a variety of benefits of usage, however credit cards have high fees attached if you have a lot payment or go over a credit limit. You must qualify for credit card by having your personal credit ran along with employment and income history.

Payday loansCash Advance, payday cash loans no credit check, Best Payday Loans Online,

Pros: Ease of use, reasonable rates, a very wide variety of benefits and rewards programs.

Cons: High interest rates & fees for those miss a payment or go over the limit.

Who should borrow: Credit cards an important financial tool for any adult to use responsibly. Student, professionals, families and the elderly.

Payday Loans

Since the borrower usually has not had their credit ran to applying this represents a great risk to the lender, payday loans charge usurious interest rates that can be as high as several hundred percentage points a month.

Pros: No credit check, quickly issuance of funds

Cons: High interest rates, high fees perpetuates a destructive cycle of personal finances

Who should barrow: In a perfect world, nobody. Those who have had an expected, yet very urgent bill come up between paychecks who will be able to pay off the loan within a matter of a few weeks.

Banks Loans

Pros: Low, reasonable interest rate. Easily transferred to bank accounts.

Cons: Banks do offer unsecured personal loan programs to their customers but they are prohibitively difficult to qualify. It is well said that a bank is where you should go for a loan if you can prove that you do not need it.

Who should borrow: Those with exceptional personal credit, income and a long history with the bank.

Private Finance

For many smaller, boutique financial firms can be the best answer for qualified borrowers seeking unsecured personal loans in greater amounts (as much as $250,000). These firms are also able to make their underwriting decisions based more specifically upon the personal situation of the borrower.

Pros: High credit lending amounts, more human underwriting standards, can in some cases of offer none recourse funding.

Cons: Qualifying standards, underwriting standards, interest rates, structuring of repayment terms.

Who should borrow: Those with a unique need and situation.

Peer to Peer Lending

A new trend in the financial world and an excellent unsecured lending option. Marketplaces like Prosper create an environment where individuals can post lending requests and groups of small investors can choose to fund them.

Pros: Lending is unsecure and fast. The lenders actually take your personal situation into account when deciding to underwrite your loan. You are paying your interest to small, private investors, as opposed to big, heartless banks or corporation.

Cons: FICO scores in the low 600's and high 500's could face as high as 34% interest rates. Prosper charges fees to the borrower and the lender.

Who should barrow: Those with decent credit.

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