Unsecured personal loans may be your best option if you need some money now, and don’t have the collateral to get a secured loan. As with almost any loan, there will be both pros and cons, and it is in your best interest to understand this, as well as some other important considerations.
Personal loan lenders can offer a variety of products, and these, along with fees and interest rates can vary widely from lender to lender, so it is going to be important to do a little digging. The following are some of the things you should be thinking about before you make any decision concerning your loan options:
Personal Loan Rate. There are a few things to consider here. Realize that if you do not have the collateral for a secured loan, you will be seen as more of a risk as a borrower and consequently receive a higher interest rate than someone with collateral. On the other hand, an unsecured personal loan will typically have a better interest rate than a credit card. Of course this all depends on a number of factors, including your credit score.
Credit Score. Do you know what yours is, or what is in your credit report? At the very least you should take advantage of your right to a free copy of your credit report and make sure that everything is correct (credit bureaus do make mistakes) and that all of the information is up to date.
Can You Get Fixed Terms? This is most often an option, and if so you should be able to get a fixed interest rate, but note that this will mean that you must pay the loan back by a certain date. If you are comfortable with this, it may offer you some protection from the financial swings of the economy. It may also help you to resist the temptation to continue spending, which is what credit cards often do.
Tax Benefits? Unfortunately, with unsecured loans, the interest is not going to be tax deductible, as it is with some secured loans.
These then are some of the things to consider when you are thinking about taking out an unsecured loan. You certainly will also want to shop around for the best deal, and using the Internet is a good way to do this, as you will be able to get quotes from around the country, and not just from lenders in your area. When you take the time to research and go about the loan process in an intelligent manner, you will save yourself both headaches and money.