Unsecured loan

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Unsecured Loans Defined

Unsecured loans are not guaranteed with any asset, thus, the risk of repossession does not exist. This doesn’t mean that the lender cannot take legal action in order to recover his money. However, such a legal process would be significantly longer and more expensive than with secured loans.

Since there is no asset securing the loan, the risk involved for the lender is higher and so, the interest rate charged for the loan will also be significantly higher. Though the gap that exists between secured loan interest rates and unsecured loan interest rates has decreased, it is still an important factor and you should shop around for the lowest interest rate available whenever possible.

As regards to loan amounts, generally you can’t request a high loan amount with unsecured loans. However, though this remains true, lately lenders have lessened their policies on this matter. Besides, the loan amount will depend on the overall value of your assets (albeit they are not used as collateral) and on your credit score and history.

The loan length also presents certain restrictions on unsecured loans that are not present on secured loans. As with the interest rate and loan amount, the loan length will be determined by your credit score and history and within certain boundaries, it is negotiable.

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