There are a number of different loans that fall under the category of unsecured loans. Here you can read both what types of loans there are and what it really means to take out a loan without collateral. Hopefully this info can help you get a better look at the area so if you want to borrow money or are just interested.
What is a secured loan
Some loans that you take with a bank are those where you offer the lender something in collateral (collateral) for the loan. For example, a home loan usually has the newly purchased house as collateral. This means that if you would not be able to pay the repayments on the loan, the lender has the right to claim the house as payment for the loan. The house will be completely sonic then sold and the money that comes in will be used to repay the loan.
A loan with no collateral thus has nothing like the bank can claim as payment for the loan in case you have trouble paying. The implication of this is that the lender considers that there is a greater risk of offering unsecured loans as it is not as certain that they will get back their borrowed money. The bottom line is that you as a borrower may pay a higher interest rate on an unsecured loan as this makes the bank feel more secure with the investment.
Now it sounds pretty awful to take out a loan without collateral when you listen to the words. However, this is not the case, but it is really a very common form of loan that you can apply for. Loans without collateral are very common.
One advantage of this type of loan is that you as a borrower can use the money for anything. You are not locked into using them for a home, for example, which applies to a new mortgage. If you want to spend the money for a holiday this is okay, if you want to pay back other debts it works well too etc.
What types of unsecured loans are there?
As with all loans, there are several different types of unsecured loans that you can apply for. We will try to list two common examples of this type of loan to show how much you can borrow and how common it is.
Private loans / Blank loans
It is very common when you think of the word loan that you think of a regular private loan or a blanc loan that it is also called. This is the most classic type of loan that exists. A private loan is simply a regular bank loan that you can take from any major bank. Here you can borrow between about USD 10,000 and up to USD 300,000 with a maturity of 1 to 12 years. A normal bank loan has taken a lot of people at some time and it is so that it is a loan without collateral.
Micro loans that have become very popular in recent years are also unsecured loans. Here you can easily borrow between about USD 1,000 and up to USD 10,000 or even more in exceptional cases for 30 – 90 days. When it comes to maturity, there are some lenders that offer even longer maturities, but then the question is where to draw the line between micro-loans and private loans, since it is often only about larger micro-loans where this longer maturity is possible. There are also many lenders that offer you to take out this type of loan without collateral.