About non secured Loans

What are non secured loans or unsecured loans?

Lending money is one of the oldest business or practice in the history of mankind after barter. In lending business, the lender lends money to the borrower based on some terms and conditions. Borrower has to repay the loan amount within a specified period and also pay some fees in the form of interest back to the lender. In modern business scenario, this process has become more complex but the basics remain the same. Basically there are two types of loans - secured loans and unsecured loans. This brings up the topic of this article which is about unsecured loans or non secured loans as it is called.

As the name suggests, non secured loans are loans which are not secured, meaning there is no collateral attached to it. This type of loan is taken by people without risking their property or other asset to the lender. The lender gives this type of loan to borrower purely assuming that he can trust the borrower to pay it back with interest. Since there is no security attached to it, this loan is more risky for the lender. In case the borrower defaults on the payment, it is very costly for the lender to recover the amount. The only thing he can do it to initiate legal action which will require a lot of money, effort and time. Therefore he charges more fees in terms of interest from the borrower. There are some loans which are for very short duration. People take these short term loans and repay them back when they get their next salary or pay. Therefore these are often called as payday loans.

Can you get a non secured loan?

Before applying for a non secured loan, you should make sure that you are eligible for it. The lenders are going to check you profile before giving such risky loan to you. Typically, the things they check are:

• You are working full time.
• You have been in the current job for more than one year.
• You have an active back account
• Your credit history is clean with no defaults.
• You have been living in the current address for atleast one year.

If you satisfy these criteria, chances are that you will get a non secured loan without having to pay huge interest rate.

Should you take a non secured loan?

That depends. The answer of this question varies for each individual but still you should follow some guidelines. You should take the non secured loan to take care of some immediate requirement like wedding, debt consolidation, funeral, family or medical emergency etc. It should not be taken just to enhance your lifestyle since you are paying a lot of fees take the loan. You should make sure that taking loan justifies the reason of taking it due to its very nature.

Features of non secured loan

Main features of non secured loans are:

• Relatively higher interest rates
• There is no security or collateral involved
• It can be taken for any purpose
• The tenure of repayment can be anywhere up to 25 years which is mutually agreed
• The lender may reduce interest rate if the borrower pays all the installments on time.
• Usually, non secured loans are given up to $15000 but it may vary depending upon your profile

Where to get non secured loans?

The quickest way to get a non secured loan is from your bank which you have your savings or current account. Since they already know you and keep your history, it would be much quicker for them to process your loan application.

Internet is fast becoming a medium to do anything while you sit in the comfort of your home. Finding non secured loans over the internet is the easiest way without having to make rounds of lenders' offices. You can check interest rates from various banks or lenders and also compare terms and conditions on one single page. It has made life a lot simpler for potential loan seekers.

In a way, your credit card is also providing you with a non secured loan or a personal loan. As long as you don’t go over the limit and keep repaying the amount, the credit card companies don’t mind giving you credit. But the interest rates on credit cards will be more than taking up a non secured loan.

Should you be a co-signer in a non secured loan?

This is a very important decision. If your relative or friend asks you to be a co-signer on their non secured loan, think twice before saying yes. This decision is not an easy one since it brings a lot of responsibility. You may be doing a favour to your friend by helping him get a loan for which he is not eligible but you have to understand that it goes to your credit history as well. It also impacts your future loan interest rates.