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Financial Education

Loan to Own

Unsecured Loans

Unsecured installment or revolving loans, sometimes called personal or signature loans, can be used for a variety of personal expenses, such as bill consolidation, education expenses, or medical expenses.

There is no collateral requirement for an unsecured loan. The terms of the loan might range from 1-5 years. Since credit card use has become popular, the use of unsecured consumer installment loans has declined. However, some financial institutions still offer unsecured installment loans.

Some benefits of unsecured installment loans include:

� Fast approval rate

� Interest rates might be lower than credit card rates

Some drawbacks to unsecured loans include:

� Interest rates are generally higher than on secured loans

� Lenders might have stricter credit requirements since there is no collateral to collect if the borrower does not pay.

If you plan to use an unsecured installment loan to consolidate your other loans, make sure the new APR is lower than your current APR.

Don�t be tricked into signing up to consolidate bills at a higher rate. You will end up paying more in interest and loan fees.

As with any other loans, you could become overwhelmed and unable to make the payments. If you have trouble paying your bills, you might consider getting credit counseling. Good credit counseling agencies can help you budget and negotiate with your lenders to make loan payments more manageable.

More information on how to choose a credit counselor can be found by taking the Charge It Right course. Also, the Money Matters course has helpful budgeting tips.