When to Apply for an Unsecured Loan | Yes Loans

We break down when it’s a good idea to apply for an unsecured loan

If you’ve ever had a pressing need for cash, then you’ve probably considered applying for an unsecured loan. This type of loan be used for a variety of responsible purposes and you can usually have the funds in your account within 1 business day, based on approval.

First, let’s discuss the difference between a secured and unsecured loan. Secured loans are loans that are backed by an asset (a house in the case of a mortgage loan or a car with an auto loan). When you agree to the loan, you agree that the lender can repossess the asset if you don't repay the loan as agreed.

An unsecured loan is not tied to any of your assets. Personal loans and student loans are examples of unsecured loans. However, the loan will be at a higher interest rate because it’s not tied to any asset. You typically need to have a good credit history and solid income to be approved for an unsecured loan.

Read further to find out the common uses for unsecured loans.

Home renovations

Whether you’re hiring a professional or decide to DIY, even small home renovations can be pricey. Most homeowners might consider taking out a second mortgage, but if you want the less risky option, but usually the slightly more expensive one, then consider an unsecured loan. It’s not secured by your home and the interest rate you receive depends on your creditworthiness. Personal loans have fixed interest rates, which means you can schedule monthly payments into a budget. The payback period is also shorter, typically two to five years.

Medical bills

There are certain procedures that Medicare does not cover (private patient hospital costs and most dental examinations) In these cases, using a personal loan may be an option. Find the best lender that offers a fast application and approval process. An unsecured loan may also be used for some elective or cosmetic medical procedures.

Debt consolidation

You’ve bitten off more than you can chew with credit card payments and now you’re struggling to manage your debt. Consolidate your debt with one payment. Applying for a personal loan can help if you’re trying to simplify your credit by turning several debt payments into one cost-effective amount. Calculate how much you’ll be needing and find a lender that will offer affordable repayment options.

A pain-free experience

Unsecured debt is not tied to any asset and creates less stress and fewer problems, but it usually comes with a higher interest rate as there is no security for a lender to fall back on should you be unable to make repayments. If you do fall behind on payments for unsecured debts, your lenders have no claim on your property and cannot repossess items or foreclose on your home. Also consider what loan is best for your situation.

Before you run and apply for a personal loan, make sure that you have looked at payment plans and that you can afford it.

Unsecured loans through YesLoans cater for a range of personal uses. For a fast and secure process, apply online today.

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