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At some point of time in our life, we all come across situations when we need unsecured personal loans. The reasons for taking out these unsecured personal loans vary from person to person, depending upon the specific needs of an individual. You too may need such a loan for whatever reasons—to pay the college fees, medical bills, buy a car, carry out home repairs, or any other major expense.
Even while taking out unsecured personal loans, your credit report plays a crucial role. If you carry a good credit history, namely, a secure job or flourishing business, timely payment of all your bills, and possession of a property, it will be easier for you to avail unsecured personal loans. You can either approach your bank or your credit card company with your request of unsecured personal loans. Being their regular customer, you might be able to get good interest rates, provided you have a good credit history.
Depending on the amount of your loan, unsecured personal loans can be classified into two distinct categories, namely, small unsecured personal loans and large unsecured personal loans.
Small unsecured personal loans are those loans that range between $500 and $10,000. Such loans prove to be very much helpful in case of sudden need of money for whatever reasons, such as paying college fees, or carrying out home repairs. You can take out a loan even to pay back pending bills and improve your credit rating.
Large unsecured personal loans range above $10,000 up to $25,000. You may need these loans when faced with a major expense, such as marriages, purchasing household items, major medical expenses, or any other high-end expense.
In order to qualify for small unsecured personal loans you should have had a regular job for the past two years and be in a regular job even at the time of application. You should also have a credit card without any late payments due on it. To qualify for large unsecured personal loans, you should have had a regular employment for the past two years and also be in a full-time job while applying for the loan. You even need to possess a credit card with no late payments on it for the past six months. These conditions satisfy the lender that you are creditworthy for the loan. But since these loans are unsecured personal loans, you don’t need to put up your home as the collateral for taking out these loans.
The duration to pay back these loans and their rate of interest also depend on the type of loan you have availed, and its exact amount. In case of small unsecured personal loans, you can pay back the amount over a time period of 3 to 7 years. Depending on the amount of the loan, and the time over which it will be paid back, the rate of interest will vary between 6.4 percent and 7 percent.
If you avail large unsecured personal loans, you can pay back the amount over a time period of 5 to 10 years. And in this case, too, the interest rate varies between 7 percent and 9 percent, depending on the amount of the loan and the time duration in which it is paid back.
There are many people out there who consider unsecured personal loans to be the loans that you don’t need to pay back as there is no security attached to it and you have nothing to lose. But the truth is that by not paying back the loan you will lose your creditworthiness, and once the credit rating gets spoilt, it is very difficult to build it again!
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