Advantages and Disadvantage of Unsecured Loan

The Pros and Cons of Unsecured loans

Many lending companies offer unsecured loans in the market because of the most advantage of this type of loan is no need to submit for collateral and even if you have a history of bad credit or if you have no credit, you can still get approved.

The Advantages of Unsecured Loans

• It is easy to Approval.
• They are offered for everyone- tenants, students, unemployed, people with bad credit or no credit history can all apply for this loan and get approved without questions.
• It has a quick Process.
• The application process is generally easy and convenient than a standard loan, Borrower can submit their application online, get approved within minutes, and receive the sum of money you borrowed on the same day you get the approval.
• The procedure is little Paperwork.
• It involves very little paperwork. Borrowers don’t have to prepare copies of the land title or home title and other documents to apply for this loan. Generally, the borrowers will only be required to submit a valid Identification to prove that they are legal with age, a proof of income and an active bank savings account in their name.
• It has the fixed-interest rate.
• This type of loans has fixed interest rate so you can be assured that your monthly instalment fees will never change throughout your repayment term. When comparing lenders, see to it that the loan comes with a fixed-rate, not a variable one.

The Disadvantages of Unsecured Loans

• It has the higher interest rates. This is probably one of the biggest disadvantages of loans with security. To make up for the risk, lending companies do charge much higher rates than what they offer for secured loans
• Limited loan amounts. To avoid the risk of defaults, loan amounts offered are limited only. This is why unsecured loans are only meant to provide short term financial support. Unsecured loans are also not recommended to use as debt repayment.
• Shorter repayment period. Unlike secured loans that come with longer repayment terms (5 years to 10 10 years), loans without security are restricted to shorter payment periods.
• Pre-payment penalties apply. Your lending company makes profit from the additional interest rate charges imposed on your monthly loan payments. Your lending company sets the length of your repayment period or the number of months you are expected to submit instalments. Therefore, if you try to pay off your loan much sooner than the time frame you were given, you will be charged with a pre-payment penalty. Before signing up for an unsecured loan, a borrower must check the pre-payment penalty cost to ensure that it will be reasonable.

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