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Advantages and disadvantages of unsecured loans

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Unsecured loans are those loans that do not require you to have an asset as collaterals for them. It is for this reason that the loan is considered by most people to be the most suitable due to its fewer risks. However, it is important for you to consider some other issues before going for one. The loan has its advantages as well as disadvantages.

One of the biggest advantages of the payday loan is that they do not require any collateral. Therefore, there is no risk of losing your asset in case of default. This makes it available to most people who do not have any asset that they can offer as collateral. For those who do have assets, they can take the loan with out putting their homes, vehicles or other assets at a risk of being auctioned in case of default.

The loans also offers flexibility on usage since the lenders do not put in place any restrictions like it is the case with other loans. At times, the lenders peg the approval of the loans on the restrictions on usage. However, this is not the case with the unsecured loan and this gives the applicant the liberty to decide on how to use the loan.

Where you do not have a good credit history, you can establish one using the unsecured loan. You can search for licensed moneylenders on sgloanbook. By paying your loan in time, you can start to improve your credit ratings. When you get a good credit rating, it is easier for you to negotiate favourable interest rates.

Since the loan does not require collateral, it’s approved very first. In most cases, the loan is usually approved in two to three working days. This makes it a good and fast source of money.

On the other hand, the unsecured loans have a number of disadvantages. One of their greatest disadvantages is that they have higher interest rates as compared to the secured. The rates usually depend on the credit history, but it is always higher than that of a secured loan.

The amount of loan that is usually given by financial institutions is usually lower as compared to that of the secured loans. Therefore, where you need a huge amount of money, this may not be the best option for you.

The repayment of the unsecured loan is also less flexible as compared to that of the secured loan. It is more difficult for you to negotiate for a reduction of the monthly instalment or even the repayment period like you would do with a secured loan. For instance, if you are supposed to repay an amount of $200 per month for 5 years, it would be more difficult for you to have this amount reduced to $250, for say 6 years, if the loan is unsecured. Even where you may intend to pay the loan earlier, you may be faced with an early payment penalty.

Therefore, it is without doubt that the unsecured loan has its advantages and disadvantages. It’s important that you take into consideration these factors as well as your individual needs before settling for the unsecured loan.


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