The market of unsecured loans is expanding, as they are much cheaper than payment cards and can be availed without collateral, unlike secured loans.
Over the past decade, payment cards like credit cards, charge cards, store cards and overdrafts have become an integral part of our lives. The blooming credit card industry is virtually over-flowing with card options and offers. In fact, for mutual benefits, many multi-nationals too have come up with affiliate cards.
Though payment cards are easy to get and make life very convenient, they have two major drawbacks – very high interest rates and restricted amount, leading to multiple cards and multiple high interest card debts. So, what are the other options in the credit bazaar?
Personal loans for personal needs… It is the most common and popular financial product in the credit market. Available in both secured and unsecured form, it provides cost-effective monetary solutions for both short-term and long-term needs. However, until some years back, personal loans were not as easily available as they are now.
As secured loans are obtained by pledging an asset as collateral, they are more suitable for big monetary requirements. The next best option is unsecured loans… Available without pledging collateral, these loans are appropriate for regular needs – especially for small and urgent monetary requirements, as offering collateral may not be essential and feasible.
Unsecured loans are the only option for people who are incapable of offering an asset as collateral (tenants and students) and a good alternative for people who are capable of offering collateral, but are unwilling to get into property related legalities or risk their property for a small amount (homeowners and property owners).
The no collateral feature of
unsecured loans leads to other benefits like no time-consuming property evaluation procedures, i.e., less paperwork and quick service. And, no repossession threat – in the event of repeated defaults or non-payment of the borrowed amount.
As no loan type is 100% safe, the limitations of unsecured loans – in the absence of collateral – are limited amount, high interest rates, fixed payback option, and preset loan terms and conditions.
