Unsecured Personal Lines Of Credit: What Are The Pros And Cons

Unsecured Personal Lines Of Credit: What Are The Pros And Cons
July 18 09:27 2017 Print This Article

An unsecured loan gives people the opportunity to borrow money. However, the decision is not as easy as it seems. It is better to carefully look at the pros and cons to have an idea of what you are getting. Using an unsecured line of credit brings forward the following advantages

No Collateral Needed

One of the definite benefits of seeking Unsecured personal lines of credit is that you do not need collateral to loan money. It means that you cannot lose valuable asset or personal property. Having limited risk is helpful especially during unexpected situations, and you cannot properly settle your debt.

Ease of Application

Another benefit is the easier processing of an application. Unsecured loans provide opportunities for borrowers to access funds without too many requirements. Different lenders offer simple process of determining one’s qualification. The process is different in financial institutions where you have to fill forms, present verification, and submit related documentation. Credit unions and banks can take days or even weeks to finish while the approval process for unsecured loans can go as fast as 24 hours.

Flexibility

Choosing unsecured personal lines of credit gives flexibility to the borrower. The method is accommodating because you only pay the interest based on the amount used in your credit account. You have free control of how much money to use as long as it does not exceed your line of credit.

The following points are several disadvantages that you need to consider before deciding to choose an unsecured line of credit.

Variable Interest Rates

One of the essential downsides of unsecured personal lines of credit is variable interest rates. Lines of credit provide interest that changes on a month to month basis. It is different from loans that offer a fixed rate for a given period. Also, it is the lenders prerogative to charge higher interest since they are trying to justify the risk. All these impacts your loan payments.

Smaller Loans

When choosing unsecured loans, you might receive smaller loan amounts than expected. Lending companies are trying to manage their risk and try to determine the suitable amount you can borrow. People consider this a disadvantage because lenders make the necessary verification and check credit reports. The outcome is you receive a lower line of credit than you initially requested.

Lawsuit

Finally, the drawback of getting an unsecured credit is you can be a subject of a lawsuit. The situation applies when you are unable to pay the money borrowed. Although this is a line of credit that puts no risk on your private property, lenders can request the court to repay the amount including fees and other costs. A bad record with credit institutions also means low scores in your credit rating.

Overall, unsecured line of credit provides key advantages that make it appealing for individuals and businesses. However, it is also important for people to analyze the potential burdens these loans create. Before making the decision, define your objectives and identify how you will handle risk.

Are Unsecured personal lines of credit better than secured ones? If yes, why? How do you qualify for them? All your questions answered at wwww.personallineof.credit.

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