Unsecured Personal Loans

What Is the Difference Between Unsecured & Secured Personal Loans?
Loans or debts are categorized as either unsecured or secured. Unsecured loans are not tied to any asset and include most credit card debt, bills for medical care, signature loans and loans for other types of services. onversely, secured loans are tied to an asset, such as your house for a mortgage or your car for an automobile loan. With a secured loan, if you are late with your payment or stop making payments, your lender can foreclose on your home and repossess your car.

Unsecured Loans
Since unsecured loans are based solely upon the borrower's credit rating, they are usually more difficult to obtain than a secured loan that has collateral with which to back it. A person obtaining an unsecured loan agrees to repay the loan within a set term and signs documents attesting to that. An unsecured personal loan is sometimes called a signature loan. Probably the most common type of unsecured loan is a purchase made on a credit card. When the person first applied for and received the credit card, the terms and size of the loan were agreed upon. Every time a person makes a credit card purchase, he signs a form that authorizes the payment and stands as an agreement to repay the money borrowed.

Banks also offer unsecured loans to a borrower. Ordinarily, both banks and credit card companies assess the creditworthiness of the borrower before handing over ‘cash’ with no collateral. Those who have lower credit scores tend to have less luck obtaining an unsecured loan. If they do qualify, they are usually charged high interest rates, since the lender is taking more of a risk.

Often, an unsecured loan is for a relatively small amount, perhaps for a one-time medical fee or a vacation. If your credit is good, shopping around for the best interest rates is advisable. Frequently, the best rates for an unsecured loan are offered through credit unions. If you have an account at a credit union, obtaining an unsecured loan should not be a problem.

If you default on an unsecured loan, a creditor’s only recourse is to assess additional fees and/or sue you, get a judgment and collect from any assets that you have. Usually, a lender will make several attempts to contact you and even turn your case over to a collection agency to try to collect what is owed.

Debt Collector Harassment
Regardless of the fact that you may or may not owe money on an unsecured personal loan, such as a credit card company, you do not need to deal with collection agency bill harassment. The Federal Trade Commission (FTC) works with consumers to “prevent fraudulent, deceptive and unfair business practices and to provide information to help spot, stop and avoid them”. The Fair Debt Collection Practices Act (FDCPA) was enacted to prevent bill collector harassment from negatively impacting your life.

We hope that you have found the above information on unsecured personal loans to be of interest. For more information on secured or unsecured personal loans, please take a moment to fill out the form on the bottom of this page to speak with a member of our professional staff. You will be happy that you took the time to secure your financial future. Please view our page on high risk personal loans.