All You Need to Know About Unsecured Loans: Types and its Benefits

 

Introduction

For those in need of financial assistance, unsecured loan may be the answer. Whether you are looking to consolidate debt, finance a large purchase, or cover an unexpected expense, unsecured loans can provide the funds you need. But what exactly are unsecured loans, what are their types, and the various benefits of getting them? This article will provide all the information you need to know about unsecured loans, including the different types available, the benefits of choosing this type of loan, and some helpful tips to keep in mind when applying for and managing an unsecured loan.

 

What are unsecured loans?

An unsecured loan is a type of loan that provides a loan without requiring any collateral. This means you do not have any collateral, like real estate or stocks, to secure the loan. Instead, it is based on the borrower's creditworthiness and ability to pay back the loan. They are also known as signature or personal loans and can be used for a variety of purposes. Unsecured loans are often used to finance large purchases, like a new car or a home renovation, make debt consolidation a reality, or cover unexpected expenses.

 

Types of unsecured loans

Unsecured loans are a popular form of borrowing for many households due to their versatility and convenience. But with so many different types of unsecured loans available, it can be difficult to determine which one is best suited to your individual needs. In this section, we will take a look at the 7 most common types of unsecured loans available. These include

1. Personal loans

2. Overdrafts

3. Credit cards

4. Car finance deals

5. Payday loans or cash advances (often called payday advances)

6. Guarantor loans

7. Equipment leases.

1.  Personal loan – A personal loan is an amount borrowed from a bank or other financial institution that you must repay over time. Interest rates vary according to the bank's current rate and the borrower's credit rating; these rates typically range between 5% - 18%. You may only borrow up to 50% of your total income per month if you exceed this amount then additional charges may apply.

2. Overdraft – An overdraft facility lets you borrow money on an ad-hoc basis by agreeing to pay interest on each transaction from day one until repayment has been completed. To qualify for this loan, you need to have an account with a specific provider and be able to provide proof of identification.

3. Credit cards – A credit card debt usually results from spending more than what you earn. To avoid running into debt problems, it is important to keep track of how much you spend each week on items such as clothes, food, and entertainment. The average credit card interest rate varies from around 9% - 17%, depending on the type of card being used and the issuing company's standard annual percentage rate (APR).

4. Car finance agreements – this loan involves signing a contract for allocating funds for purchasing new or used cars, trucks, or other vehicles through monthly payments. The amount owed will depend on how much was financed when the agreement was made and any outstanding balances owing as well as any fees charged by both the parties who are involved in settling the agreement.

5. Payday advances - A payday loan or cash advance is a small loan where people deposit part of their paycheck upfront with the understanding that they will get back the rest later. It is usually given out in smaller increments like $100 or less to help meet short-term needs while minimizing the risk exposure. Some lenders offer payday loans online, but borrowers should always investigate any lender before making a final decision.

6. Guarantor loans – These loans allow someone who has sufficient assets and good credit history to act as a guarantor for another person who is applying for a loan. They essentially make themselves responsible for paying off the debt should anything happen to the borrower such as bankruptcy or inability to work due to illness.

7. Equipment lease – With an equipment lease, you are renting rather than buying property and paying rental installments periodically over the set periods instead of making large lump sum payments upfront. Leasing helps minimize the risk because you do not own anything outright and can return leased property without incurring penalties if necessary.

 

Benefits of unsecured loans

If you are wondering why you should consider an unsecured loan, here are a few reasons

1.     No collateral is required - As the name suggests, unsecured loans don’t require collateral, like real estate or stocks, to secure the loan. This means you can borrow money without having to put up something of value.

2.     Quick and easy application process - If you have a good credit score, applying for an unsecured loan is quick and easy. Many lenders allow you to complete the application online and receive a decision within hours or even minutes.

3.     Affordable repayment terms - Since you do not have to provide collateral for the loan, you can negotiate affordable repayment terms and choose a payment plan that fits your budget.

4.     Access to a large loan amount - Lenders will typically loan you up to a certain amount, and the amount you qualify for will be dependent on your credit score and income.

 

Conclusion

If you require a loan, unsecured loans from EFT capital may be the answer. The unsecured personal loans offered by EFT Capital are ideal for many different purposes, such as paying off credit cards, purchasing a vehicle, or dealing with other expenses that cannot wait. With the right knowledge and understanding, unsecured loans can be a great financial tool to help you meet your goals. Now that you know what unsecured loans are and what types are available, it is time to start researching lenders and applying for the loan that best fits your needs.