There are two major types of loans: secured and unsecured. Unsecured loans are usually popular because it is easy to obtain. They are not attached to any collateral, allowing borrowers to get money for almost any purpose. With unsecured loans, people are not worried that they lose everything if they are not able to pay on time or not at all. This type of loan is a little less risky for borrowers as the consequences are not as immediate if you fail to repay.
Below are some of the unsecured loans you can get:
Credit Cards
A credit card is a form on unsecured loan because you are only borrowing money from the credit card company to buy something and paying back at a later date. Using a credit card means you have a pool of money available at your needs. Credit cards are popular due to the fact that borrowing money is easy; once application is approved, you can use the money with anything you want to purchase.
Payday Loan
This popular loan type usually came from a non-financial business. The borrowers get enough money to cover their expenses and make a payment on their next paycheck. Payday loans are easy and convenient. However, they have a high transaction fee as well as huge interest rates.
Student Loans
This type of loan is designed for education funding. This is always a good fit for students because they can get unique features that cannot be found somewhere else. It has flexible repayment options, enough grace periods, and subsidized interest. There are no other requirements except the borrower should be a student.
Small business or Start-Up Loans
Usually, start-up businesses have few assets or no collateral at all to use when they apply for a loan. Most of the financial institutions will offer unsecured business loans for those who are starting to put a company. Depending on the loan company you borrow from, the repayment terms can be flexible. Keep in mind that the loans are being approved with the understanding that the business is responsible for paying back the loan.
Peer to Peer Loans
This loan is allowing you to borrow money from individuals instead of traditional lender such as a bank. There are many online loan companies allowing people to post a loan request and individuals may or may not accept the request. These peer to peer loans are on a fixed-rate instalment and features competitive interest rates. However, keep in mind that your credit score is important to get approved.
Signature Loans
This type of loan is unique because it only needs your signature to secure a loan. The borrower only needs to promise that he or she will repay the person or business lending money. Signature loans are frequently available at banks and other credit unions; usually released in instalments. Generally, the borrower will pay back the loan with certain monthly amount until the total amount has been repaid fully. This loan has a lower interest rate, and so it is recommended for first-time borrowers.
Term Loans
This is offered by financial institutions with a specific amount that is agreed by both lender and borrower. The agreed amount has a fixed repayment schedule and to be paid on following options: monthly, bi-monthly, or bi-weekly instalments.