There are a variety of loans that are available in the market. One of the most common amongst them is an unsecured loan. Unsecured loans are also called personal loans or signature loans. They are called unsecured loans because it is given on the basis of credit worthiness of the person applying for loan and there is no need of keeping collateral. There are a variety of services like Bynk that help you to find the right institution to avail an unsecured loan.
In depth analysis
Well an unsecured loan isn’t the easiest loan to get as you will need a great credit score. Generally, interest rates are significantly higher than regular loans, as there is no security needed. This loan is a risky affair for the lender as they have to rely on the words of the applicant and their credit scores in order to decide if they are to be given the loan or not. In a lot of cases lenders ask for a cosigner in the loan so that if the borrower defaults he will have the legal obligation to repay the debt.
Different types of unsecured loans
There are 3 major types of unsecured loans in the market right now, which are:-
- Revolving loans
Revolving loans are like a cycle of debt creation and payment. Under this a borrower gets to spend a specific amount which he will have to repay and after that he can spend that amount again. Credit cards are the perfect example for these loans.
- Term loans
These are the most common type of loans. Under this the borrower takes a loan and has to repay it in equal installments until it’s fully paid-off. This loan type can be also availed in secured loan category.
- Consolidation loans
These are the loans that are taken to pay-off previous or some other liability. These are short-term loans which can be easily availed in emergencies.
