When it is said that a loan is “unsecured” that means that it’s given without collateral. Collateral is something offered up as security for the lender, which the lender will receive if the loan is defaulted on. For instance, car loans are considered secured loans because the car is the collateral. If the borrower defaults on the loan and fails to make payments for a long enough period the car can be repossessed. A lender feels safer lending money on a car loan because they know the borrower is concerned about potentially losing their car if they fail to pay, whereas with an unsecured loan nothing is at risk except the borrower’s credit rating. While most people and businesses place value on having good credit, most people would be more concerned about losing their car since many people need it to make a living and survive. Having bad credit is not ideal of course but there are steps that can be taken to improve credit so it’s not the end of the world.
With that covered, unsecured business loans are very popular for businesses that need an influx of capital for whatever reason. These loans come in all manner of sizes and structures depending on the borrower’s credit rating and past payment history.
Here are some of the benefits unsecured loans can offer:
- EASY AVAILABILITY OF FUNDS:
If a borrower has a good history of credit and is looking to start up a business, he/she can opt for unsecured business loans. Unsecured business loans can often be acquired with very minimal paperwork in as little as 24 hours. Interest rates and loan amounts available are typically based on credit rating, so he better the credit rating the more that can be loaned out and the lower the interest rate will be.
- INTEREST RATES ARE COMPETITIVE DUE TO COMPETITION:
More and more lenders are springing up everyday offering loans to consumers and businesses. Because of this they are all battling to provide the best terms to attract the most customers. Furthermore, when lenders see that you have taken out and properly paid back unsecured loans in the past it makes them more comfortable offering larger loans in the future.
- FLEXIBLE TERM LENGTH:
The term refers to the number of months the loan lasts for. Unsecured loans can be set up to last just about any length of time but it typical to see them offered in lengths lasting from 12 months to 84 months. Usually a shorter term loan will have a lower interest rate since the money gets paid back more quickly and the longer term will carry a higher rate since the borrower has access to the capital for a longer period. The longer terms also have the benefit of a lower monthly payment since the payback is stretched out over a longer period.
- APPLY ONLINE:
The ability to apply online for many unsecured loans has made the process of getting capital much more convenient than it used to be. Borrowers usually just need to fill out a few details and consent to a credit check, and the automated underwriting system can process results oftentimes immediately. Once approved and details verified, funds can be deposited into your account.