An unsecured personal loan is a loan that has no collateral attached to it and because of this there is usually a limit on how much you can borrow. Quite often if a larger amount is needed you will be able to take out more than one unsecured loan at any one time but these will need to be from different companies.
Although this type of loan is not hard to obtain you will often be required to pay a higher interest rate for the privilege.
Unsecured loans can be taken out for many reasons; you may be looking to buy a new car or for home improvements or even to increase your credit rating if you have had problems taking out a loan in the past.
If you are taking the loan out to improve your credit score it is important that you keep up the payments and never make a late payment or miss one as this will effect your credit score in the future.
By improving your credit score you will increase the chances of getting a lower rate loan in the future saving you a huge amount of money.
Taking out an unsecured loan to consolidate your debts could prove challenging as your debts are likely to be larger than the maximum loan amount you can borrow for a specific company and because you may be asked to pay a high interest rate you may find you are not that much better off.
It is important to calculate this properly, work out how much you owe and how much interest you are paying on all your loans and credit card to determine if and unsecured loan will in fact benefit you.
The advantage of consolidating your debts is you will only have one loan to pay off, however once this is done it is very easy to begin running up debts on your newly cleared credit cards so it is important to have some form of financial plan in place and know exactly what you can afford to pay out each month without spiralling into more debt.
If you have decided an unsecured loan is for you then it is wise to shop about, there are many companies that will give you a quote over the phone or online as well as face to face. Be aware that there are also scams out there so a recommendation from a family member or friend is always a better option.
Ask friends and family if they can recommend a good reputable company that you can trust and you can also check on the internet for reviews and comments on specific companies.
Unsecured loans are a good way to generate some extra cash or pay off existing debts but be aware that because they are unsecured it does not mean you have no risk of losing something normally your house should you not pay it off and bear in mind missing a payment will effect your credit score in the future so it is important to keep these up to date.
