Have you been thinking of obtaining a loan without the requirement of having collateral? If you’re reply is yes, then maybe the kind of solution that you are searching for is unsecured loans. But before we even find out how this loan will help your business achieve its financial objectives, let us first define what this loan type means.
In terms of unsecured loans, the loan company will only offer funds that are extended according to the borrower’s or business owner’s credit reliability, financial position, and general reputation. The business owner will be instructed to sign a promissory note, without needing to pledge any collateral or assets. This type of loan is also referred to as a good faith loan, a signature loan, or a character loan.
What’s the difference between secured and unsecured loans?
A secured loan is the cash that a particular person will borrow that is secured against collateral or an asset, like your house. This type of loan might be risky for the part of the borrower, so you should have a good understanding on how secured loans work and the consequences that can happen if the payment terms are not met.
In contrast unsecured loans are simpler, since the borrower and the lender will only have to concur with how to make common payments until the cash is paid in full. Unsecured loans have more risks for lenders as they do not have the ability to seize any assets in case a borrower fails to repay the debt. The lenders may sue the borrower to obtain access to the other property, but it will be more costly than requiring the borrower to provide collateral up front.
How does unsecured loan work?
Since this type of loan is not secured by any type of collateral, you will find bigger risks for lenders. Therefore, it will require higher interest rates in comparison with any secured loans, like a mortgage. Nonetheless, unlike mortgage loans, the interest in unsecured loans will never be tax deductible. In case you fail to meet the agreed payment conditions, you may incur additional charges. This could lead to damaging your credit rating, and may result in bigger problems in the future. To prevent this type of problem, be sure to do a lot of analysis about unsecured loans before applying for one.
Are you looking for more information on how you can get accepted for an unsecured loan? All you need to do is contact Capitalize for reliable and expert advice on applying for unsecured loan.
Capitalize is a corporate loans specialist firm that helps Small Medium Enterprises (SMEs) and individuals to seek, source and obtain capital from across our established network of up to 30 banks, financial institutions, funding houses and alternative platforms. We are always committed to provide our clients with the most suitable loans according to their needs, from the lowest interest rates possible and at the quantum they require.