Unsecured Personal Loans vs Secured
No matter who you are and what your situation is, the term “personal loan” is likely to enter your vocabulary at one point or another.
You may want to consolidate your credit cards or do some home improvements. Alternatively, you may just want to feel secure and have funds in your bank for an emergency.
No matter what your reason is for desiring a personal loan, you can qualify for one. The two most common types of such loans are secured and unsecured.
What Is a Personal Loan?
What Is an Unsecured Personal Loan?
What Is a Secured Personal Loan?
A secured personal loan is the complete opposite of an unsecured product. The lenders require the borrowers to give up the rights to something temporarily to “secure” the loan. Such lenders want to make sure that they can get their money back even if the borrowers default on the repayments.
Oftentimes, lenders will ask the borrowers to allow them to put a lien on their homes or vehicles until they receive the funds. Stocks and bonds could qualify, but home deeds and car titles are much more popular options.
What Is Cosigning on a Personal Loan?
Some lenders offer the option for the borrower to have someone cosign for his or her advance. A cosigner is a person who can qualify for a loan because of a high credit score or glowing repayment history. This person usually has access to superb interest rates and a vast assortment of credit cards and loan products.
When a cosigner signs for someone, that person promises to assume responsibility if the other person defaults. The cosigner remains a responsible party for the duration of the loan. Those are the options that people usually have with secured loans.
Unsecured Personal Loans vs Secured Personal Loans?
When considering unsecured personal loans vs secured personal loans, you must consider that each one has several positives and negatives.
The greatest benefit of qualifying for unsecured personal loans is that you minimize risk. You receive the funds you need without having to obligate yourself to anything but making your payments on time. Another benefit of an unsecured loan is that it can help boost your credit.
If you pay your advance on time, you can see a generous increase in your overall score. The downside is that unsecured loans usually take longer to process than secured loans do. Loans from traditional banks may take several weeks to process, for example.
If you have an emergency, you may want to go the secured route. Some brands of unsecured loan products can have super-high interest rates, as well. Those are generally quick to obtain, but you may find yourself paying something in the area of 30 percent interest.
What Are the Different Types of Personal Loans?
Some of the most common types of personal loans are peer-to-peer loans, traditional loans, payday advances, title loans, installment loans and so on.
Payday advances are unsecured, and title loans are secured. Installment loans stretch over a reasonable course of time. Peer-to-peer loans come from your peers instead of traditional entities. You can speak with a finance specialist about which option is best for you.
What Are the Best Companies to Apply Online?
Here are a few suggestions for online personal loans to get you started.
Credible is a lending network that connects you to personal loans. They have a network of high quality lenders. You just fill out one easy form and will receive multiple rate quotes. This allows you to get a lower rate and avoids having to apply to multiple loan applications and lenders.
PersonalLoans.com can connect you to personal loans of up to $35,000, and they can find terms that allow them to pay over the course of months. The credit requirements are flexible.
Lending Club offers personal loans of $1,000 to $40,000. You will generally need to have good credit scores. They claim to have a quick turn around time, as well. These are peer-to-peer loans and are funded by individual investors. After filling out the online application you will receive rate quotes. Once you accept the funding process starts. After you loan if fully funded, it will then be direct deposited into your account.
Other notable places to apply for a personal loan are Prosper.com, Upstart or your local bank. Credit unions can also offer you personal loans, and they often offer lower interest rates than banks do. Online personal loans have become much more popular and have a much quicker process. Credible, PersonalLoans.com and LendingClub are all excellent choices when applying for personal loans for debt consolidations, credit card payoffs, home improvements or any major purchases.
How Do You Get a Personal Loan?
The first step to getting a personal loan is to complete an online application. Before you apply for such a loan, you should consider all the pros and cons of unsecured personal loans vs secured personal loans and then make a decision.
Make sure that your credit score is up to par if you’re going to apply for an unsecured personal loan of any kind. Taking the time to improve your score could have a huge impact on what happens with your interest rate.
Always take the time to explore your options and see if you can obtain the funds some other way first. If you do choose to obtain a personal loan, make sure that it works with your budget and your time frame.