What is an Unsecured Loan?
When you’re thinking of borrowing money, the use of the word “unsecured” may be slightly worrying to those unused to financial products and services. In reality an unsecured loan is not only a very legitimate and safe way of borrowing money, but in many cases it’s a better option for the average consumer.
Let’s take a look at unsecured loans, how they work, and more importantly where to get them from.
The World of the Unsecured Loan
Unlike a “Secured” loan, an unsecured loan does not require you to put up any personal assets as security.
When you take a secured loan you’re expected to offer security in the form of your home or motor vehicle. That way if you’re unable to repay your debt for any reason the lender can recover some of their money by taking ownership of your assets.
With an unsecured loan because the lender has no security they are much more careful about who they lend to and how much the let them borrow. A credit score is much more central to the successful application of an unsecured loan than it is with a secured loan, and because of this you should take a look at your own credit file before you apply.
It’s not unusual banks and other financial companies to make the odd error on your file, and those mistakes could go against you when potential lenders come to credit check you. Anything you’re unsure of on your file should be queried with the relevant financial institution so errors can be corrected before you apply for your unsecured loan.
Where’s the Best Place to Borrow From?
The good news is that unsecured loans are offered by most decent banks and independent lenders so your choices should be plentiful. This gives you the chance to shop around for the best deals.
Find a loan with a low rate of interest, low fees, and flexible terms. Because lenders are fighting each other for new customers you’ll normally find some very good deals if you take the time to hunt around a little. Don’t rule out the online only lenders as they can often offer some great products at very affordable prices.
How Much Can I Borrow?
This depends on the lender and your current financial situation. Lenders will take into account your income and expenditure, in addition to any outstanding debt you may have before deciding how much to give you. It’s fairly safe to assume that those with a better credit history will be able to borrow more.
Unsecured loans will generally offer you between $1000 to $25,000 depending on where you look.
If you need more money then the chances are you’re going to need a secured loan, as these tend to carry much higher borrowing limits. Mortgages are secured loans as they are secured against your property. If you’re looking to borrow a large sum of money, but don’t have a property to put up as security then you’re going to need to have a car or some other asset to offer instead.
It Still Needs to be Paid!
Although an unsecured loan doesn’t require any security, it’s still a debt and must be paid in full. Failure to meet your payments on time could result in a court order, and will certainly have a bad effect on your credit rating. This would leave you in a position where obtaining any form of credit would become very difficult.
As long as you make your repayments on time then unsecured loans are a great option if you’re looking for an affordable way to borrow money.
Featured Personal Loans
| Personal Loan | Details | Min Interest Rate | Min Comparison Rate | Min Loan Amount | Min Loan Terms | Apply Fee | |
|---|---|---|---|---|---|---|---|
 ME Bank Personal Loan | A low rate personal loan from ME Bank with no application fee for a limited time. | 13.59% | 13.81% | $5000 | 1 year | $0 |   |
 Aussie Personal Loan | A smart way to consolidate your bills to save time and money so you can pay for your holiday, a wedding or renovate the house. | 13.90% | 14.84% | $3000 | 1 year | $199 | |
 Sugar Money Personal Loan | Fixed rate personal loan with flexible options to get you funds when you need it. | 13.99% | 15.00% | $3000 | 2 years | $250 | |
 bankmecu Personal Loan | A convenient and fast way to purchase a car or debt consolidation with affordable rates and fees. | 13.49% | 14.55% | $1000 | 1 year | $150 | |
Related posts:
- Unsecured Car Loans – Guide to Comparing & Applying for an Unsecured Car Loan
- Unsecured Personal Loans – Compare Unsecured Personal Loan Offers
- Unsecured Personal Loans – Options for Bad Credit, No Credit Check and Pensioners in Australia
- Unsecured Personal Loan Rates Comparison
- Personal Loans Unsecured
Ask A Question