Unsecured loans are a great way to receive money for whatever requirements you may have. You may take these loans pay off your outstanding credit bill or repairing your house etc. These loans are quite beneficial than other loans that are available in the market today. As the name suggest, unsecured loans do not require any kind of collateral to lend you the money. It hardly matters to them, how you would be spending your loan money. Hence, prospective borrowers can spend it for any expenditure they may have.
Anyone is applicable for an unsecured loan, regardless of the size, value of your personal assets. Also, the loan amount is generous, and even the repayment terms are easy to follow. So, unsecured loans are a great solution for any kind of purpose.
Requirement for unsecured loans
Credit rating is important in the US for loan approvals. Unsecured loan lenders also look at the credit rating before approving any application. But that is not the criteria they look at. There are other factors as well that play an important part in loan approval. Also, even though your credit rating is good and tells the lenders that you would pay the monthly installments on time, yet there is not guarantee that your loan would be approved.
Unsecured loan lenders are more concerned about other characteristics of the borrower. For them, job stability and security play much higher role than other things. They need to be assured that despite your monthly expenses; you have enough money to pay back your installments. So, the more you earn monthly, the better are the chances of loan approval.
Defaulting on unsecured personal loan
Since there is no collateral involved, borrowers prefer to take this loan for their expenditure. But, just because the lenders do not have anything to collect if you don’t pay your loan that does not mean that you would not pay the loan timely. There could be serious repercussions for payment defaults.
Where can you apply for unsecured loans?
Banks are not the only sources from where you can get unsecured loans. Today, there are other private financial institutions as well that provide these loans. These companies even have less stringent requirements for loan approval, which makes them a better source for applying unsecured loans. However, if you are taking an unsecured loan, be prepared to pay for a higher rate of interest because the lender does not take any collateral and risking their money when dispersing them to you. You can easily apply for these loans online that are easy to apply and have quick approval process.
Credit Rating impacted – Like any other loans, even in unsecured loans, credit ratings get impacted if you don’t pay the EMI’s on time. You would see a significant drop in ratings if there is a default. The first impact is done after your loan is 30 days past due. If you pay after this, there are chances that there would not be huge impact on your credit score. But, if the loan amount reaches in 60 – 90 days past due bucket, then there is a considerable drop in the score. After this, in all probabilities, your account would be passed to debt collection agencies for an attempt to collect.
Additional charges – If you default your payments, you are liable to pay the due amount and the lender would also charge you with additional charges like late fee. So, till the time you don’t pay the due amount, the principal amount of your loan would keep increasing. The amounts can go higher by the passing time, and you may find it impossible to repay it.
Legal penalties – The lenders have full authority to take legal actions against you in the case of payment defaults. In other cases, if you default on your payment, the creditors would seize your asset and auction it to get their balance amount. However, in unsecured loans, where there is no collateral involved, the lender can file a lawsuit against you and present your loan in front of the judge. It is then in their hands what they decide. If they find that you are could not pay because of genuine reasons, they might decrease your penalty charges and ask you to pay principal amount.
So, these are some considerations that you need to take before taking any kind of loan.