We make our best to budget our money. There is money which goes to the rent, money which goes to food, money for bills and of course a little something for ourselves too. However, we encounter emergency situations sometimes. Emergencies which require the amount of money we currently do not have. What do you do when you find yourself saying, “I need 3000 dollars right now”? The answer most probably comes in the form of loans.
I need money today. Unsecured loans can be your salvation. However, this might not the answer for everyone’s needs so think things out carefully before you make any decisions. Unsecured loans do not require collateral; this is why it is called unsecured. Lenders are putting themselves at a risk because they are lending money without anything to hold on to should the borrower not pay his loans. Because of the same reasons, the interest rates of unsecured loans are also relatively higher; however, they are lower than most credit card rates.
Unsecured loans also have fixed terms. They have to be paid at a certain period of time and their interest rates are also the same throughout the payment period. They can also work as a revolving line of credit just like a credit card. When this happens, the interest rate then becomes variable. The interest on unsecured loans is also not tax deductible.
For people who do not own a home pr people who do not have much of an equity, unsecured loans are the best option. A borrower will be disciplined to pay off the loan regularly within a set time. One of the many things which attract people to unsecured loans is the fact that the interest rates are lower than those of credit cards’.
The downside is the fact that the interest is not tax deductible. Rates can also easily go over 10 percent. The borrower will be paying far more interest than on home equity loans.