Loans are there for people who need it but not all loans are easily accessible. Some loans will require a lot of paper work and background checks before the approval is granted. When you need money in a hurry, these types of loans are definitely not going to appeal to you. You will probably be looking at options that offer you faster access to money without the many questions and long delays.
That is why people are happy to go with personal loans especially the unsecured loans. Unlike a secured loan that will required a collateral, one that is unsecured needs no collateral and as long as you have a good credit score, you should be able to get approved and have your money in hand in a relatively short time. However just like other types of loans, personal loans have their advantages and disadvantages.
These types of loans permits the borrower to use the money for any purpose that they deem fit. There are no restrictions. The borrower can use it to sponsor a holiday, go shopping or even give it to charity. The banks wouldn’t bother. They will only become worried if you start defaulting on your payments.
As long as you have a good credit score that the lender is comfortable with, you can get approved for this type of loan in a very short period of time. It is especially good for those who need money to cover an emergency.
No collateral needed
The lender is not going to ask you to bring your house or your car or some other valuable possession of yours. For this kind of loan, your collateral is probably your good credit score. This means that those with no assets can get these loans as long as they have maintained a good credit history.
Despite their seeming attractiveness, these loans have their own disadvantages
High Interest rates
The interest rates charged on these loans can be fairly high when compared to other loan type. This is could be due to the fact that it is financial loan with no collateral backing it. Nonetheless, the high interest rates could be a problem when it comes to paying back.
No allowance for part payments
Most lenders who offer this type of loans will not allow that you make part payment. What this means is that you must pay the loan for its intended duration. This can end up being very costly for the borrower.
Need for high credit score
Since the defining factor to whether a borrower gets approved or not depends on their credit score, those with low credit score will not be able to benefit from this type of loan.