A personal loan is a wonderful thing for people who do not have many liquidity options available to them. The personal loan allows individuals to plug gaps in their personal finances that may arise due to unforeseeable situations.
A good example of this would be an individual, who does not have many savings, encountering a medical emergency. The personal loan can allow this individual to get the required medical treatment without actually jeopardising his family’s future. Personal loans usually require collateral to be sanctioned.
However, this proves to be a problem for many individuals who do not own anything worth putting up as collateral. In the majority of situations, such individuals find themselves in a dilemma when the need for money arises in a short term scenario. For such individuals, the solution is an unsecured personal loan.
As you have no doubt already surmised, an unsecured personal loan is a personal loan that does not require any collateral to be put up by the applicant. Instead, these types of personal loans rely on the individual’s employment history i.e. he should have a steady income together with creditworthiness.
While unsecured personal loans sound like a wonderful deal to many people, they do come with one flaw. This is the fact that unsecured personal loans are usually hamstrung with exorbitant interest rates. Fortunately, the good part is that unsecured personal loans tend to be for small amounts of money which reduces the threat posed by the high interest rates.
The logic is simply that as the borrowed money is small in amount, the borrower can quickly pay it off to counter the threat of high interest rates. The problem of high interest rates also ceases to be a problem if you have taken out a few unsecured personal loans in the past and returned the borrowed money consistently.
What happens is that, owing to your consistent repayments for previous unsecured personal loans, the lender who you have been dealing with would start trusting you and giving you more affordable interest rates.
Applying for unsecured personal loans is also very easy in that the process is simple and quick. Such personal loans only require some basic documents and can be sanctioned in a matter of days.
Furthermore, the repayment schedules for unsecured personal loans are also usually fairly accommodating. For example, if you were to go for an unsecured personal loan, you can pay it off very quickly and on terms that will be fixed from the start.