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TMCNet:  Unsecured loans :Your good name speaks itself

[November 02, 2009]

Unsecured loans :Your good name speaks itself

Are you really looking for an opportunity which can help you fulfill your dreams even if you dont own an asset that can avail you a loan? In this era,where inflation have crossed its limits,one feels so helpless to satisfy even his basic needs like education,wedding expenses,starting some new business,house renovation and so on. And,one gets more tensed when he has to face problems regarding denying of loans due to non-availability of a worth asset. Its very obvious that the lenders require some security in the form of valuable assets like house, building, land or real estate against the loan payment given by them in order to avoid any kind of risk. But, keeping in view the needs of those who dont have a valuable asset of their own,Unsecured loans have been introduced.


Unsecured loans, otherwise known as Personal Loans or Unsecured Personal Loans are the loans that are not secured against any asset. The real meaning of an unsecured loan is that it is not backed by any object of value and is lent to a person based on his good name. Basically, they are provided on the basis of one's market reputation,earnings potential and other assets owned. Any security against loan payment is not required. Therefore,the borrower needs to sign a promissory note stating the terms and conditions under which the loan will be repaid. Also,the lender may ask a Guarantor to sign the note which pledges to repay the loan if the borrower defaults,which is also known as a good faith loan.

There are three types of unsecured loans: * First there is a personal unsecured loan, meaning a loan that you individually are responsible for the repayment of.

* Second is an unsecured business loan which leaves the business responsible for the repayment.

* Finally there is an unsecured business loan with a personal guarantee. With the latter, although the borrower is the business, you as an individual will be the payer of last resort if the business defaults on the loan.

If we critically analyze the situation, these loans are very risky for the lender as he gives the amount of money to the borrower on the basis of the promise only which the borrower has made.Since these loans are not secured against property or any asset, it is more difficult for a lender to get their money back if the borrower does not or cannot repay the loan. For getting the specific amount of loan, the borrower should always contain a good credit history. One can easily get such loans on the basis of a good credit history. One can also get the unsecured loans if he has a bad credit history.

These loans are well suited for people who need loans for comparatively shorter period of time as the interest rates for such loans are slightly higher. And,one may face problem in the repayment of the loan if it will take a longer period of time. These loans are considered to be the faster loans in the financial market as the loan amount can be obtained in an easier and sooner way ,since the evaluation of property or document portion is skipped off. The repayment of the loan amount can be made within 1 to 10 years. These loans are easily accessible especially for the non-home owners, tenants and students. Also the home owners can avail this loan without risking their valuable assets.

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