Unsecured Personal Loans

by Mack Bartlett

Unsecured personal loans can also be referred to as a personal loan and in some cases a tenant loan. Recently it has also been called a secured loan, so in truth it covers any type of loan. Why are these types of loans popular? Because you can get them from your bank, building society or even a specialist lender online.

The amount you can borrow on an unsecured personal loan is usually between $500 to $25,000 with a repayment period of up to 10 years. Since an unsecured loan isn’t tied to anything if you miss a payment it could easily adversely affect your credit history. The downfall to having a bad credit history is you’ll likely find it difficult to obtain credit, get interest free deals or low interest rates.

Be aware that with unsecured personal loans you may be expected to pay an interest rate somewhere between 7 – 20%. This is the reason that it’s smart to shop around. Don’t simply rely on your own bank but do use them for comparison purposes. Places to look include online and a small number of retailers.

Now, another type of loan that requires no collateral is to call them guaranteed bank loans for people with very bad credit. It’s not just people with high fico scores that need to borrow short term cash, so it’s actually very possible to get an unsecured personal loan with poor credit, you just have to know where to look.

Of course, you need to exercise caution before you take on any debt. There are plenty of unethical bad credit unsecured loan companies out there who will lend you the money under false pretenses and then treat you poorly.

Some tips to keep in mind when comparison shopping is to ensure that you are comparing like for like when it comes to interest rates. Beware of marketing and advertising tactics that are there to trick and confuse you. For instance, a lot of lenders with quote the APR as a yearly APR whereas other lenders will quote a monthly APR, which will clearly look to be more competitive.

When repayment is concerned, a bad credit unsecured personal loan can be repaid over a period of ten years although some lenders may offer extended repayment periods if you have a good credit history. Remember there may be some stipulations to this plan as the lender may also decide to charge you a slightly higher interest rate for the extended loan period. So, as always, the best financial advice when it comes to these types of loans is to try and repay them over the shortest period possible.

There may be something called a repayment break attached to the loan which some lenders are now offering in an attempt to get your business. What this means is that normally at the beginning of the loan the lender will give you the option of making your first payment for 3 – 5 months after the loan was given.
Let’s walk through a scenario where a person borrows an unsecured personal loan for poor credit, and then goes through that period of three months without having to make any payments. It’s very possible that this borrower will forget he owes the money, and even if he remembers the debt, the three month grace period gets him accustomed to the little burst of cash, but doesn’t get him accustomed to the resulting payment. When the grace period ends, he hasn’t adjusted his spending habits to ensure that he’s ready to make his payments on time. So you have a borrower who already has bad credit has taken on more debt that he can’t repay. It becomes a vicious cycle of more debt and more missed payments.

Rather than dive recklessly into personal loans for people with terrible credit, why not look into other poor credit unsecured loan options? There are definitely other ways you can go. You’d probably be a lot wiser to borrow whatever money you need from a family member or friend who knows you and trusts your willingness and ability to repay the debt. They might charge you 10% interest or so, but that’s a lot better than paying 30% or more.

What have we learned today? It’s important to remember that the interest rates, repayment periods, and terms attached to unsecured personal loans for poor credit people vary from one lender to the next. Take your time finding the best loan agreements that work for your needs. Compare and shop around to find that deal that will best fit you. Also make sure you know about any penalties or set-up fees that may be applied.

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