While no one goes into a loan with collateral with the intention of not paying, it happens. Your circumstances can change and that would mean you risk losing that item of value. It is always safer to pursue personal unsecured loans. While the interest rate may be a bit more due to the added risk for the lender, it offers you protection for your personal items of value.
Not everyone has collateral they can use, but they still need to borrow money. If you still owe on your home or your vehicle, the lender likely can’t use those as collateral anyway. This is because the original creditor has first access to them if you don’t pay them. Therefore, another lender can’t get mixed up in using them to secure any type of loan.
Just because you don’t have collateral though doesn’t mean you shouldn’t be able to borrow money. With personal unsecured loans, you can easily get the money you need when you need it the most. You don’t have to feel like you are slipping through the cracks due to the unfair need of collateral so often in place by lenders.
Avoid a Co-Signer
You can avoid asking a friend or family member to co-sign too with personal unsecured loans. It can be very stressful to ask someone to take on such a responsibility for you. If you don’t pay the loan as you should, they are legally responsible to pay it back to the lender. This can cause a strain in your relationship with them if things don’t go according to plan.
It can be embarrassing to ask someone to co-sign for you too. It can make you feel like you aren’t able to control your financial needs on your own. Keeping your borrowing private is also something most people like to do. They don’t want to share with others they have a need to borrow money from any lender.
Sell Items of Value
When you have collateral securing a loan, it is tied up until that loan is paid back in full. With personal unsecured loans, you can sell those items of value at any time if you wish to do so. You have the freedom to do what you want with those items. If they are used as collateral, they are frozen until the loan is paid off. That can be a long time from now!
What happens if your car isn’t running well and you need to get a new one? You aren’t going to be able to do so unless you have a way to pay that loan off early. It can be very frustrating to be locked into such situations for any length of time.
Slash Interest Rates
Even though personal unsecured loans have a higher rate of interest, you don’t have to pay it if you play your cards right. Plan your repayment schedule so you are able to pay more than the least due on it each month. By doing so, more of what you pay will go towards the principal balance. You will pay it off in less time and cut the amount of interest you pay to the lender.