Many demands of life can force an individual to make a decision into getting a loan, this may be a home loan, car loan or a loan to serve any other purpose. There are different types of loans available, these include the secured loans and unsecured loans among other types of loans that can be tailored to meet an individual’s personal needs.
Many people prefer the unsecured loans because of the flexibility offered by this type of loan, with the unsecured loan one can borrow money without having to provide any form of security against it. When it comes to taking of an unsecured loan there some are pros and cons mentioned below.
Pros
1. The unsecured car loan will not demand for any security, and this can be an advantage especially for borrower who has no form of security to put against their loan.
2. The loan process is much quicker to be approved than the secured loan that demands for security, this means that the individuals are able to purchase their choice of car within a few days after the loan application. It also involves very little paper work which is an advantage for both the borrower and lender.
3. There is a fixed amount of money that can be borrowed which means that with the unsecured car loan one will not have to hand in any valuable items as security to the lenders.
4. The unsecured loan is suitable for individuals who have no property to be used as collateral against the loan which makes it applicable to people who would like to own a car even if they have no form of security. The unsecured loans are appealing to all types of people who could probably not have been considered for a loan unless they had items to offer as security.
Cons
1. The individual will have to pay a higher interest rate for the unsecured car loan which could range from 7-30 %. This may be way too high above their intended budget for purchasing of a car.
2. The borrower has to make a refund of the unsecured car loan within a period of between 6- 10 years, unlike the secured loans which have a longer repayment period. With such a short repayment period given, to pay back the loan the individual may fail to pay back the unsecured loan on time and loose everything including the car.
3. The amount of money that can be lent under the unsecured car loan is much lower than the amount of money one can borrow on the secured car loan, this may cause a problem for the borrower by not being able to meet their needs and yet have to pay back the loan together with high interest rates.
4. Individuals who are not working but are financial dependents are not likely to be approved for the unsecured car loans because of the high risks involved. The lender has to judge and see if the borrower is capable of paying back the loan and if the lender has doubts about the capability of the borrower paying back the loan then they will deny the borrower the loan.