An unsecured personal loan does not require the lender to put down any collateral. This type of loan is also known as a signature loan because all that is required as collateral is your signature. The criteria for an unsecured personal loan are based on the credit of the borrower and have nothing to do with whether or not you own a home or rent.

Despite the fact that the lender has no claim to any of the borrower’s assets in the event that the loan is defaulted on, the lender can choose legal means to recover the money. If the case is won in court by the lender, the borrower may then find it necessary to sell some of his assets to pay back the money.

Due to the fact that this loan is not secured, the interest rate is generally high and the APR or rate of interest is greater than that found on a secured personal loan.

Advantages of an Unsecured Personal Loan

There are some benefits of an unsecured personal loan that are worth taking into account:

• Credit history is the variable that lenders look at and assets play no role in the decision making process.
• Borrowers do not have to worry about providing any copies of their tax returns or any financial statements. Most lenders of guaranteed unsecured loans offer a stated loan which means that the person is taken at their word about the present state of their finances and does not need to have documents to verify such.
• Borrowers do not have to come prepared with an elaborate business plan as an unsecured personal loan can be sought for any purpose, whether it be personal or otherwise. The lender is not as concerned about your purpose for wanting to borrow the money but instead about your ability to pay the money back.
• Most unsecured personal loans are approved in a relatively short period of time which means there is no long drawn out waiting period for the money.
• The application process for an unsecured loan is very simple and easy to fill out. In most cases it is a one page application form with very basic information required.