What are the Different Types of Unsecured Loans?

If you’re looking for a personal loan that’s easy to avail and you can use for almost any purpose, look no further than unsecured loans. Unsecured loans are personal loans that do not require any security or collateral thus the fast processing. In fact, most providers can approve loan applications within hours and you can receive the money immediately after the loan is approved.

If you’re planning to borrow money to consolidate debt, pay an overdue bill or to take care of medical emergency, there are suitable unsecured loans perfect for your needs. Here are the different types of unsecured loans to compare:

Signature loans

The most basic type of unsecured loans is called signature loans. To apply for the loan, you don’t need any security; just your signature that will essentially signify your agreement to repay the loan. Examples of signature loans include credit unions and personal loans from banks. Signature loans are ideal for borrowers with a good credit history because then the interest rates are relatively lower. Just go directly to your bank or credit union to avail a signature loan.

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Credit cards

Credit cards when used properly are another type of unsecured loans handy for a wide variety of personal needs. Rather than receive a lump sum, you have available money whenever you need it with credit cards. You can charge purchases to your credit cards up to your credit limit then repay it monthly over time. Both customers with bad credit and good credit can avail this type of loan. Just keep in mind that the interest rates are relatively higher than other types of unsecured loans. You can apply for a credit card from banks with more offers available if you have a good credit score.

Peer to peer loans

If you’re not comfortable borrowing money from banks, there are peer-to-peer loans you can check out. Peer to peer loans let you borrow directly from an individual lender rather than from a bank or high street financial institution. This means that there’s no middleman involved hence lower interest rates and faster processing. To avail this type of unsecured loan, all you need to do is go online, post a loan request and wait for a response from a peer or lender. If you have good credit, getting someone to fund your loan through peer to peer lending should be easy and quick.

Payday loans

If you have a bad credit score and you’re having a hard time getting a personal loan, payday loans are worth considering. Payday loans are unsecured loans specifically offered for people with bad credit problems. Just like other types of unsecured loans, you don’t need a security, just your signature and proof of steady income. If you’re working full time with proof of your recent pay slips, you can avail a payday loan deal even if you have a poor credit history. On the downside, the interest rates for payday loans are pretty steep, typically at around 1,000% representative APR.

Doorstep loans

Another type of unsecured loan ideal for people with bad credit is called doorstep loans. As the name suggests, doorstep loans are loans that you can apply for right on your doorstep. You don’t need to go to the lender because the lender brings the loan to you. Just like payday loans, you just need to provide proof of steady income to be able to avail the loan. Regardless of your credit score, you are welcome to borrow a small amount of money for financial emergencies with doorstep loans.

 

 

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