unsecured loans

Unsecured Loans

Personal loans are typically given either as secured loans or unsecured loans. Unsecured loans are a good way to get cash fast to pay off debts, go on a holiday, or make a major purchase for your home. Technically, a personal loan cannot be used for business purposes; for that you should look into an unsecured business loan instead.

Characteristics of Unsecured Loans

An unsecured loan is called “unsecured” because the lender does not require the borrower to put up any kind of collateral. In a secured loan, the lender must offer their home, auto, or other valuable property as collateral for the loan. If the borrower defaults, the lender takes possession of the collateral in order to recover their money.

In an unsecured loan, the lender essentially relies upon the borrower's word that he or she will pay the loan back. In order to get an unsecured loan with reasonable terms, therefore, it is better for the borrower to have a decent credit rating. However, some lenders will give an unsecured loan to individuals with bad credit, but the terms of the loan will not be as favorable.
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