Should You get an Unsecured Loan?

Whenever you hear about the term ‘medsøker lån’, some may think it is not a good type of loan to get. But what many don’t know especially those who haven’t experienced getting a loan before, is that its only base is you creditworthiness. If you are eligible of getting a loan without any more requirements like collateral.

 This is the type of loan most first time borrowers get especially if they need it right away because you do not have to have many requirements. It is fast and easy; from applying, to listing your name up to giving you the money.

Unsecured Loan

An unsecured loan is one that is obtained without the use of property as collateral for the loan, and it is also called a signature loan or a personal loan. Borrowers generally must have high credit ratings to be approved for certain unsecured loans.

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Variety of Unsecured Loans

  • Credit cardsare a common form of unsecured loan (even though you might not think of them as “loans”)
  • Student loansare generally unsecured
  • “Personal” loans, which you can use for any purpose you want, are often unsecured loans

Some Examples of Unsecured Loans

  • Revolving Loan

An arrangement which allows for the loan amount to be withdrawn, repaid, and redrawn again in any manner and any number of times, until the arrangement expires. Credit card loans and overdrafts are revolving loans. It is also called evergreen loan.

  • Term Loan

A term loan is a monetary loan that is repaid in regular payments over a set period of time. Term loans usually last between one and ten years, but may last as long as 30 years in some cases. A term loan usually involves an unfixed interest rate that will add additional balance to be repaid.

As mentioned above, Lenders will always check for your credit history. Lenders check your borrowing history to see if you’ve successfully paid off loans in the past. Based on the information in your credit reports, a computer creates a credit score which is a shortcut for evaluating your creditworthiness. To get an unsecured loan, you’ll need good credit. If you’ve done very little borrowing in the past (or you have bad credit because you’ve fallen on hard times in your past), it is possible to rebuild your credit.

 Lenders want to be sure that you have enough income to repay any new loans. When you apply for a loan (whether secured or unsecured) with a partner, lenders will ask for proof of income. Your pay stubs, tax returns, and bank statements will most likely provide sufficient proof of income. Then, lenders will evaluate how much of a burden your new loan payment will be relative to your monthly income. They typically do this by calculating a debt-to-income ratio.

If you’re not able to qualify for an unsecured loan based on your credit and income, you might still have options. One approach is to ask a co-signer to help you get approved, but this can put everybody in a difficult situation.