What Are The Different Types Of Unsecured Loans Available?

Unsecured loans are the loans that are given to the borrowers without keeping anything as security by the banks or lenders. The unsecured loans are offered to people based on their income, credit score, financial documents, and many other factors.

As there is no collateral kept by the bank, so the risk factor for this type of loan would be higher. These types of loans are available from businesses for various purposes such as to start a new business, expand the existing business, buy new equipment to run the business, etc.

This type of loan helps the entrepreneur to get a new capital to expand the business and grow. The loan interest charged by the banks for this type of loan is pretty high.

Few types of unsecured loans include:

Personal loans

This is a short term loan that is taken by the individual to meet their long or short term financial commitments.

To avail this type of loan, you do not need to put anything as security unlike the home or car loans where you need to put security to get the loan approved.

This type of loan is availed by many people to meet their financial needs without asking for money from a friend or a family member.

Although the interest rates are high, there are a few lenders who are offering flexible repayment options. This loan can be used for medical emergencies, paying the college fee of your children, renovate your home, purchase a gadget or go for a vacation.

There are many lenders who are allowing the borrowers to apply for this loan online. The paperwork done to get this loan is also less and is sanctioned based on the income, credit history, repayment history of the borrower.

Business loans

The main objective of every entrepreneur is to expand their business and see it growing. For a business to grow the main thing that is required for an entrepreneur is the capital and this capital is provided in the form of unsecured business loans by the banks.

This is the best option that is available for business owners to get financial aid immediately. However, it takes a little amount of time to get this loan approved since the banks should take a look at your credit history and other financial documents thoroughly before sanctioning the loan.

They give the loan to the people who have the capability to repay within the set time period.

Education loan

This type of loan also falls into the unsecured loan category. This is the ideal option available for the students who want to pursue their higher studies and lack funds.

This loan is a boon for the students to fulfill their career aspirations. There are many lenders who are offering this type of loan at lesser interest rates and with flexible repayment options.

Credit card

This type of card is given by the banks and financial institutions to the people to buy using the credit card and repay the amount later.

This is the best alternative to cash. There is a myriad of benefits a customer can reap by using credit cards. These include cash backs, rewards, interest-free periods, etc.

There is a huge demand for credit cards globally and there is a gamut of credit card options provided to the customers by the banks with different features. You can pick the card that suits your financial requirements.

Payday loan

No matter whether it is the start of the month or the month end, you would get unexpected and unforeseen financial emergencies.

You cannot borrow from your friends and relatives and ruin your relationship for not paying on time and listening to “no” from them. So, the best option that is available for the borrowers is to take a payday loan.

This type of loan can be availed by the people who want the cash immediately and can repay back as soon as they get the paycheck.

If you maintain the emergency fund, then you do not need to worry about it, but in case if you have no money in hands and have to pay for the medical expenses or buy medicines, then you need money in hands.

This money can be obtained immediately by availing payday loans. You can apply for the loan and get it approved on the same day.

The money will also be credited to your account immediately, which you can use to meet your financial needs. This type of loan is also called as instant loan and an unsecured loan.

Business cash advance

This type of loan is given based on the earlier debit and credit sales. This has to be paid back every week based on sales.

Equity crowdfunding

This type of loan is given as a contribution by multiple lenders in return the lenders would receive equity in the business and repayment amount.