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People are hesitant to take on a secured loan since they do not want to put their car or home on the line or they just don't have any collateral. In this case, there is another available option for you.
Unsecured Loans
An unsecured personal loan is a type of loan which is based solely upon the borrower’s credit score. Since you're not furnishing your lender any form of collateral, you can expect that the rate of interest that goes with this kind of loan is a little bit higher compared to a secured loan because of the high risk involved.
Factors that Affect a Lender’s Decisions
A borrower can either have a good to excellent credit score or a bad credit score. Take for example the person with bad credit. There are unsecured loans available for people with bad credit, however, he/she will be given a lower loan amount and a higher interest rate. For a person who has excellent credit score, instant approval plus a higher loan amount and lower interest rate is to be expected.
What you earn can also affect a lender’s decision. It serves as a guarantee that you can pay back your loan on time. People with good average income are more preferable by lenders than people with lower income.
Rules for Repayment
Each lending company has a different set of Terms and Conditions as well as payback options. Generally, the payback term of an unsecured personal loan is shorter than a secured loan since quick repayment of funds is considered as a securer option by most lending companies. Normally, borrowers are only given five years or less to pay back their unsecured loans, no matter how much they've borrowed.
3 Helpful Tips for Unsecured Loans Applicants
1.Shop Around.
Some people make the mistake of submitting loan applications to every lending companies they come across. Make the best of the internet. Research lenders who offer unsecured loans. Compare your possible options and pick the one that offers the best deal.
2.Negotiate.
Having a bad credit history should not stop you from requesting a lower interest rates and better deals. Try to ask your preferred lender if they can provide you with a longer repayment term or lower monthly payments. Make sure you do your own research first before signing the contract.
3.Can You Really Afford Paying the Loan Back?
You have already found an unsecured loan that is just right for your needs, but, it's important to ask yourself if you're able to make your payment on time. A late or missed payment can leave a negative remark on your credit report.
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