Often the only way to be able to meet your personal, professional, or financial goals is with a little extra funding. There are many places to acquire loans for all of your needs, from banks and credit unions, to mortgage companies and even peer-to-peer lending.
But it is not good enough to only know that you need a loan, you also need to know what kind of loan you are looking for. Loans come in two primary types: secured and unsecured loans. These loan types have to do with collateral. If you have collateral for your loan it is a secured loan; if you do not have collateral for your loan it becomes an unsecured loan.
There are pros and cons to having an unsecured personal loan that relate back to the lack of collateral. Carefully weigh there before deciding that an unsecured loan is the right or wrong loan for you.
The most obvious benefit to an unsecured loan is that you do not have to assign an interest to any of your assets to a bank or finance company in exchange for funding. If you do not have anything that can be used as collateral an unsecured loan is ideally for you!
Another pro of an unsecured loan is that it can be used for almost any purpose. The proceeds from an unsecured loan can be used in any way you see fit, whereas in many secured loans the use of the loan is stated up front and the funds must be used for that purpose.
An unsecured loan poses more of a risk to lenders than a secured loan. As a result an unsecured loan may be more expensive: higher loan fees and/or higher interest rates. This helps the lender offset bad loans in their portfolio.
Additionally, an unsecured loan may not have as favorable terms as a secured loan and you maximum loan limit may be much smaller. As an unsecured loan represents a greater risk to the lender they may not be willing to go as long as a secured loan or put as much money at risk.
An unsecured loan offers many of the same advantages as any other loan, providing a needed pool of capital. Beyond that unsecured loans have advantages and disadvantages over secured loans that should be examined carefully.
In any case, if collateral is impossible to come by an unsecured personal loan may be your best option. As with any loan, be sure to know exactly what the terms of the loan are and make sure that they fit your needs. In the right circumstances an unsecured loan may be exactly what you need.