From time to time, you may want to go on a travel endeavour, execute a home renovation project, make a hefty purchase, or more. As always, the barrier is the financial aspect of these exciting initiatives. Yes, loans are always an option, but what if you want to leave your assets untouched?
Thanks to the existence of unsecured loans, personal loans that don’t require collateral at all have been made possible. Instead, they require a good credit score. Let me tell you more!
What Are Unsecured Loans?
Unsecured loans, also called unsecured personal loans, enable you to borrow money without presenting an asset as collateral to the lender. Accordingly, it empowers you to use the loan for whatever purpose you desire while leaving your current assets aside.
While people use their fast payday loans online for a diverse set of purposes, here are some of the common ones:
- Engagement rings
- Home renovations and improvements
- Car repairs
- Cosmetic surgeries
- Debt consolidation
What Are the Benefits of an Unsecured Loan?
Unsecured personal loans boast a lot of benefits for borrowers, the most important being flexibility. Unlike secured personal loans, unsecured loans aren’t restricted by “type”. For instance, with secured car loans, the loan has to be used for purchasing a vehicle. That’s not the case with unsecured loans – you’re free to use the money however you want.
Moreover, unsecured loans are very standard, so it’s not hard to find many variations according to the standards of different financial institutions, lenders, and banks. That leaves plenty of room for you to choose the best unsecured personal loan for you, depending on what you have in mind.
Last but not least, it’s true that unsecured personal loans for bad credit have higher interest rates than secured loans, but that doesn’t mean that good offers aren’t lying around. That’s especially so with peer-to-peer lenders, individual investors who offer money to borrowers and serve as facilitators for loans, offering almost identical rates to those of unsecured loans.
So, take the time to conduct a thorough unsecured personal loan comparison to narrow down the best unsecured personal loans online before choosing a final lender!
How Does an Unsecured Personal Loan Work?
Generally speaking, the unsecured fast cash loans Australia offers range between $1000 to $100,000, depending on your needs. As we’ve mentioned, you won’t need any assets, like cars or property, as collateral. But like any other loan, you repay the principal loan amount along with interest over a specified loan term, which generally ranges between 1-7 years.
When you receive the quick loan amount, you can use it for any purpose you see fit, but it’s okay to find that the loan application asks you why you’re applying for an unsecured loan in the first place. You don’t have to be exceedingly specific with this part, but it does contribute to the lender’s final decision.
As for interest rates and fees, unsecured personal easy loans for cash have higher interest rates than secured ones, but as we’ve discussed, there’s that tradeoff between flexibility and interest rates. Plus, according to the lender or bank, it’s likely that you’ll incur establishment fees and maybe ongoing fees, so pay attention to the fine print at the end of your application letter.
You also want to check whether your private finance loan comes with any special features, like being able to repay the full loan amount without being penalised, for instance.
Why Are the Interest Rates High?
You’re probably asking yourself that question, and the answer is quite simple. With unsecured loans, the risk of default is higher for lenders. Since you don’t need to provide collateral, there’s practically no guarantee to the lender that you’ll pay the fancier loan amount on time.
In contrast, since lenders basically have ownership of your asset with secured easy approval loans, they don’t have to worry about whether you’ll repay the loan amount or not. In the worst-case scenario, they’ll simply sell the asset and cover the loan’s cost.
So, the high interest rates are merely a way for lenders to safeguard themselves.
How Do You Find the Best Unsecured Personal Loan?
As we’ve mentioned, comparing your options is a vital part of the process of taking out an unsecured personal loan. From cheap unsecured loans to pre-approval personal loans and more, there are a lot of options that you’ll come across. To be able to make up your mind, here are the factors you need to consider:
- Interest rate: Look at whether the interest rate is fixed over the repayment period or whether it’s variable. The typical range for unsecured personal loans’ interest rates is 7-18%, so anything above or below that is out of the equation.
- Loan amount: Check both the minimum and maximum loan amounts offered by the different lenders. Ensure that the amount you require falls within the range of the lender.
- Loan term: Contrary to popular belief, the longer the loan term, the more you pay. Opt for the shortest term you’ll find to avoid accumulating costs.
- Fees and charges: Always check the loan’s terms and conditions very thoroughly. Keep an eye on upfront administration costs, ongoing fees, and comparison rates. Then, calculate the loan’s overall cost to have a better idea of what you’ll need to repay.
- Special features: Some lenders offer unique features to make their loans stand out, like online account management, redraw facilities, discounts on additional financial products, and more.
3 Tips for Borrowing an Unsecured Personal Loan
Some straightforward tips can go a long way in increasing your chances of getting your unsecured personal loan approved and also help you repay them on time. So, based on the experience of numerous borrowers, here’s what you need to keep in mind:
1. Don’t Be Tempted to Over-Borrow
Since unsecured loans have quite a broad range, it can get tempting to apply for a higher amount than what you actually need. Take our word for it; that’s one of the worst mistakes you can make. Unsecured loans are very costly in the long run, so to avoid paying in excess just for interest and fees, stick to the amount you really need.
2. Make Sure That You’re Eligible
Since unsecured loans are high in risk for lenders, you need to be sure you tick every eligibility box before applying to increase your approval chances. Lenders do scrutinise your application when unsecured loans are involved, so you don’t want to fall short. Below are the general criteria:
- You need to be 18 years or older
- You need to Australian or have a permanent residency in Australia
- You need to provide proof of a stable source of income
- You need to have a high credit score
3. Boost Your Credit Score
Closely following the previous point, a good or excellent credit score is a must for unsecured loans. So, if that doesn’t apply to you at the moment, you should work on boosting your credit score so that you don’t pose a greater risk to the institution lending you the loan. We know that’s easier said than done, so here are a couple of ideas to help you:
- Pay all your due bills and continue paying them on time
- Make small and more frequent payments to your existing loans and credit cards (if applicable)
- Fix any incorrect listings in your credit report
- Don’t apply for new credit frequently (by frequently, we mean once every three months)
- Only keep your credit card if you can consistently pay it off each month
- Lower your credit card limits if you don’t always use it to the peak
- Showcase stability in your lifestyle (don’t shift jobs or move houses frequently)
- Don’t frequently apply for new loans
Unsecured loans are perfect for those times when you just need funding for a diverse range of purposes that you don’t have available instantly. They’re also in the middle of the spectrum; they have lower interest rates than credit cards but higher than secured loans, so they’re quite the versatile option.
Yet, due to the high risk posed for lenders offering you the loan, you must ensure that you’ll be able to make your repayments in time. If any unforeseen circumstances take place, honesty is the best policy. Let your lender know right away to avoid any potential late payment fees and negative impacts on your credit score.
All in all, unsecured loans have one of the easiest application processes, so if you’re proceeding with the loan, make sure to check the simplicity of our online application at Perfect Payday, you’ll get a response from us in no time!
And once you get the loan approved, the funds will be transferred to your account in an instant, and just like that, you’ll be able to purchase or book or do anything you want to do, for that matter. Could it get easier than that?