People who don’t want to pledge any asset for borrowing money always opt for an unsecured personal loan. This kind of loan doesn’t require any collateral, but it’s entirely based on a borrower’s creditworthiness. Since the lender will not hold any security against the loaned amount – he would make sure he studies your credit score carefully to see your capability to repay the borrowed amount.
A person interested in this kind of loan must have a good credit score for getting instant loan approval. On the flip side, a person with bad credit finds it hard to get the approval of an unsecured loan from a bank or credit union- through online lenders can be an excellent financial resource for him. High Interest — One main characteristic of an unsecured personal loan is the high-interest rate. As no asset is used as collateral, thereby this loan brings more risk for the lender. Therefore, he always charges a higher interest rate on an unsecured loan than a secured one.