Unsecured personal loans require no collateral, and are guaranteed solely by the borrower’s commitment to repay them. These types of personal loans can have a bad reputation when confused with payday loans, title loans, cash advances or other short-term forms of financing with high interest rates. For that reason, most people turn to credit cards when they want to borrow without putting up collateral, even when unsecured personal loans are most often a better choice.
Here are a few situations in which you should consider an unsecured personal loan.
1. Need to Finance a Purchase Quickly
If you are in the market to make a large purchase or cover a major expense like a vacation, an unsecured personal loan is a great choice. Lenders will use two main factors — the applicant’s credit rating and their debt-to-income ratio. With no collateral to appraise, these loans can be processed and funded fast.
2. Desire a Lower Interest Rate
It may be possible to obtain a better rate with an unsecured personal loan than with a credit card. As mentioned above, the rate offered depends in part on the applicant’s credit rating and individual lender guidelines, so it makes sense for the borrower to compare the credit card and personal loan rates that apply to them.
3. Want to Cut Spending
Unsecured personal loans also make sense for people who are tempted to spend more by easy access to credit through credit cards. With a personal loan, the borrower receives a lump sum and then begins repayment. As payments are made, the balance declines, and the consumer cannot run the balance back up again, which takes care of overspending.
4. Prefer a Fixed Rate and Term
Unlike credit cards, which come with variable interest rates, unsecured personal loans will most often have fixed interest rates that do not change during the loan terms. In addition, personal loans have regularly set loan payments, allowing borrowers to make the same payments at the same intervals on a set schedule until the loan is paid off. This is perfect for people on a fixed income or working within a strict budget that don’t want the worry about increasing payments.
To get the best rate on a personal loan, it’s important to shop and compare rates and terms from competing lenders. Here at AmOne, we make that part easy! To get started, visit https://www.amone.com/offers/personal-loans/.