What is An Unsecured Personal Loan?

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An unsecured personal loan is when a lender agrees to lend you money without any form of collateral, such as a home or car.  This lack of security on the lenders part is the reason why it is called an unsecured personal loan.  Your credit rating is the sole variable used to determine whether or not you will be approved or declined for an unsecured personal loan.

Please note that unsecured personal loans and personal loans are the same thing.  Since a personal loan is a loan based on your credit score, requiring no security or collateral, has the same literal meaning.  Different lenders may refer to them in different terms, however, so don’t be surprised if you come across different terminology.

How Can An Unsecured Personal Loan Help You?

If you are in debt, the last thing that you should do is acquire a larger debt load, right?  In most situations, that is completely correct.  However, acquiring an unsecured personal loan to act as a consolidation loan is a very wise move, and can even help you become debt free.

This is due to the properties of unsecured loans:

1. Fixed interest rates – Unless the lender specifies otherwise, most personal loans have a fixed interest rate.  While some loans have interest rates which vary based on market conditions, a fixed interest loan means that you will always have the same cost of borrowing attached to each payment.

2. Fixed monthly payments – This will help you plan your budget better.  At the end of the loan term you will also have paid off whatever debt was consolidated by the loan.  So long as you didn’t go out and obtain new forms of credit your personal financial obligations will have substantially decreased.

3. Lower monthly payments – Since most forms of credit have interest rates in the mid teens/ low twenties, consolidating those high interest payments onto a loan that has a 10.9% interest rate, such as the loans offered by Oceans Finance, will save you a bundle every month in interest.  As well, your monthly rate will be dependent on your consolidation loans payment terms and payment duration.

A consolidation loan is a great way to help free up your finances and set your financial track record in the right direction.  However, you will defeat the purpose entirely if you turn around and spend the money that you are saving on frivolous items, or choosing to obtain other forms of credit.  The moral of the story?  Don’t bite yourself in the butt with poor decision making.