Personal loans come in mainly two modes, secured or unsecured. The secured ones use your asset – it can be a house or a car – as a guarantee that you pay. In that case, the loan is much riskier to you if you default on it, but it is less risky for the lender.
But, what about unsecured personal loans? Are those loans that simple? They are not.
What Are Unsecured Personal Loans?
Unsecured personal loans are almost the opposite of the secured ones. In other words, unsecured personal loans do not require your car or house as security. That means that if you default on your loan, you won’t lose your car or your home.
However, in comparison with secured loans, these loans come with higher interest rates because the lender is taking a greater risk. This means that the lender will get a part of its money back from the interest rates and fees if you default on your loan.
What Are the Advantages of Unsecured Personal Loans?
The first thing you should know, and it is quite evident, is that you don’t need to supply your lender with an asset to secure it. So, if you are buying a car or a house with this loan, you won’t lose it. The same thing goes with an asset that you already own. Another attraction of using unsecured personal loans is that you can invest in anything you like. Once your loan has been approved and transferred you can use this loan to invest into a vacation, a new car, renovate your home, and pay bills or consolidate your debts.
Another benefit you should know about is that unsecured personal loans are easy to get. The process of accepting your request and transferring the money is short and doesn’t require a lot of paperwork.
What Are the Drawbacks of Unsecured Personal Loans?
The first thing you should know and be careful about when applying for an unsecured personal loan is represented by the high fees. The loans come with higher fees than secured personal loans because that’s how the lender compensates for the lack of security. Check out all the fees you need to pay before accepting the terms.
Another thing you should know about this loan is that it also comes with a high interest rate. The interest rates are higher than those of secured loans because this service is riskier, especially if the client defaults on it. Again, it has to do with a lack of security, and the lender has to get his/her money back in case something bad happens.
There are also the penalties you get if you miss payments. For every missed payment you will be charged. Not only that but if you default on this loan, the lender has the legal right to take you to court.
How to Get the Best Unsecured Personal Loan?
The first thing you will need to do is a bit of research. Check the market for all the lenders available that offer unsecured personal loans. The next step is to compare these services. What you want is to get the personal loan with the lowest interest rate because that will save you money in the long run. You should also look for lower fees. You can be charged upfront, you can be charged with ongoing fees, etc., and if you do the math, you will realise that you are losing money. Try to find the loan with the lowest costs.
The minimum and maximum loan amounts should also interest you. Check how much a lender can give you. An unsecured personal loan can go anywhere from one thousand to fifty thousand Australian dollars. The bigger the gap is, the better for your investment. Additional features such as redraw facility, online account management, discounts and so on, can make your life easier. You should check that as well if you rely on certain features.
Another thing we recommend is that you ask an expert in finances what to look for when searching for the right unsecured personal loan. You can find one online, or you can check NSW Mortgage Corp for more information. You will get all the details you need in a short amount of time.
Conclusion
We hope that you learned a thing or two regarding unsecured personal loans. We recommend checking the website we posted above if you are not sure what type of loan or even banking service you need. The team of experts is ready to help you get out of any financial situation.
