When do expensive unsecured loan actually make sense?

Having some extra money at the hand, however, seems like a great option. Even if it comes as a loan that, thus has to be repaid back with an interest. Isn’t it? But that loans, in general, are considered as a good option, if one is, however, not living beyond his/her means. Personal loans are thus one of the easiest and the quickest means of getting the hands on some of the additional money.

Since these loans, however,  do not require any collateral, i.e. are thus unsecured loans, the only however guarantee is the borrower’s promise in order to repay them. But these loans are thus costly with the high personal loan interest rates. The reason is thus that since there is, however, no security/collateral, the lenders are required to be compensated for taking off higher risk.

It’s, however, possible that the borrower needs some money urgently for the short period of time. Borrower might however be short of funds today, but there is a certainty  that he  would  be able to generate these funds through other sources in the  near future. So thus a personal loan at this juncture can thus be a convenient way in  to bridge this short-term money requirement.

Most of the other loans are thus  given for some  specific use. An auto loan can however  be used only for purchasing of  an automobile. A property loan can thus also only be used in order  to buy a property. But the  personal loan borrowers have the flexibility in how they choose in order  to spend the borrowed money. This flexibility of use is thus one of the reasons as to why the  people prefer to go for the personal loans even though these have a  higher interest rates.

Since there are thus  no collaterals, the process in order  to apply for these kind of  loans is not very challenging and it also  has very little paperwork. Lenders decision is thus based solely on the applicant’s credit history, the current debt-to-income ratio and the other customer information. Since the application processing however  doesn’t take much time, the  personal loans are thus  disbursed fairly quickly and this is thus  another reason in order  to consider this option.

Then also many people thus  have no other option but to resort to the  personal loans. Reasons  being that they however thus have nothing much in order to put up as a  collateral. Hence the only option  which is left for them in order  to raise money is however  to apply for the  personal loans.

But before taking a personal loan, borrower must however  make sure that the  factors like current income, current expenditure, future income prospects and the existing loans are thus considered. Borrower doesn’t want to be in a situation where he is not earning enough, but then taking a loan to live beyond what he earns. This would thus be a really bad idea as far as his  personal finances are concerned.

By | 2018-01-08T09:40:38+00:00 November 4th, 2017|Business Loan, Personal Loan|0 Comments

About the Author:

Pulkit Jain is the founder of LegalRaasta – India's top portal for registration, trademark, return filing and loans. Pulkit is a veteran CA with over 10+ of experience.

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