Educational Resources: Loan to Own
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Unsecured Loans
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.