Getting a loan can be an extremely annoying and tiresome process. Most people find the paperwork and the documenting too tiring. Then came the demand for loans, without any proofs or documents. Unsecured loans were born. An unsecured loan is a loan for which no assets or property has to be shown as collateral. The demand for unsecured loans is growing in several parts of the US and across the world as well. While applying an unsecured loan, no assets or property needs to be given as collateral. This clause makes it amazingly easy for many people to obtain the loan. Ranging from students to professionals, unsecured loans are here to stay. However, there are certain criterions that must be met, prior to applying for an unsecured loan. The first thing that the lender will see is the borrower's capability to repay the loan. Since no assets are being given in collateral, there is no other way out other than analyzing the borrower's present financial situation. This is done to ensure that the borrower pays back the full capital in the stipulated amount of time.
Interest rates on unsecured loans are higher than those on secured loans. Since you do not show any assets here, you will have to shell out important documents like your tax return forms, bank statements, credit record etc. These loans are most popular among tenants and those people who do not have any property to show as proof while applying for a loan. Interest rates can be met adequately by those earning a decent salary. Also, the time for repayment is not as generous as those on secured loans. The repayment time is generally within one year, to prevent defaulting.
If you are low on capital, then I suggest that you do not go for unsecured loans. This is because; the high interest rates might force you to borrow from other sources and will thus increase your chances of debt to a much higher extent. This will worsen your current situation. Most lenders charge high interest rates. But proper research will end you up with better lenders, who charge less.
There are also many lenders who entertain bad credit borrowers. That is, they offer unsecured loans to those with low credit scores and bad credit history. The general amount given through this mode is from around 2 to 10 grand $, though higher amounts are obtainable upon negotiation. But since the repayment period is around 6-8 months, most people are driven to further debt.
Secured loans, on the other hand, offer many more benefits. Lenders are not too strict with borrowers and late payments are not dealt with harshly. Even repayment time is negotiable. These benefits are not available with unsecured loans.
So, on the whole, unsecured loans are fast, easy and expensive whereas secured loans are long and tiresome but offer better benefits. But hey, you can't have your cake and eat it too!