Loans Money Matters
Why Would Anyone Need an Unsecured LoanTuesday, February 19, 2013 Mary Anne Velasco
Although an unsecured loan is not always going to be in the best interest of the borrower, there are many reasons why someone may prefer an unsecured loan over a secured one in the long term. The general gist of most people's reasoning is that an unsecured loan is typically much easier for them to secure, and is more straight forward in terms of the repayment process and expectations. In short, an unsecured loan is much more simple and easy [http://www.unsecuredloans.org/understanding-unsecured-loans.html] to handle financially than some of the other options that are available, depending upon your situation. A few of the reasons why people may choose an unsecured loan over a secured loan include:
● Fast Approval
The approval for an unsecured loan is going to be much faster than a secured loan on the whole. There are multiple different reasons for this. To start, you often are not going to be required to agree to a credit check before being approved. Secured loans almost always require a look into your credit history to determine whether or not you are a trustworthy individual and also whether or not you can be trusted to pay the loan back in the agreed upon amount of time. Also, very little documentation is required during the approval process, which greatly speeds things up. In the case of payday loans, you often will only need proof of your monthly income, and the date of your next paycheck in order to be approved for the loan.
● Fixed Interest Rates
Another reason why many choose to go with an unsecured loan over a traditional loan is the fact that the interest rates are generally fixed. With secured loans, often times you are forced to agree to a variable interest rate which could cause a lot of problems for you in the future, should the interest rate rise unexpectedly. A fixed interest rate is desirable because you can be certain that you are always going to be able to afford your payments, and will be able to accurately calculate the payments that you are going to owe moving forward.
● Documentation Not Always Required
With unsecured loans like payday loans, there is going to be little documentation required in order for you to be approved for the loan. In fact, documentation is usually limited to proof of your income, and an outline of your upcoming pay periods. This allows the lending institution to gauge exactly how much you will be able to afford to pay back, and when they can expect payment. With secured loans, which are generally much larger in overall value than unsecured loans, the company does an in depth credit check and may require other documentation before moving forward with the process.
● Easy Payment Schedule
Generally speaking, the payment schedule for unsecured loans is generally fairly straight forward and easy to remember. In the case of payday loans or cash advances, you are given an amount of money, and expected to pay that amount back, plus the accumulated interest, the next time that you receive a paycheck from your place of employment. Some institutions may choose to stretch that number out over the course of several paychecks, but this is not always the case.