In the current economic climate, it can be difficult or even impossible to find loans with favorable terms of interest or collateral, as many banks are unwilling to provide loans to individuals or families with less than sparkling credit. There are, however, other options for acquiring a loan for a housing payment, a holiday, an investment or an expensive event. Unsecured loans are different from standard issued loans in that they do not require upfront financial or property commitments; there is no collateral required. While this is understandably appealing to many customers, an unsecured loan gives the bank or credit bureau far more leverage in determining length of repayment contracts and interest rates. Finding the cheapest unsecured loans may require extensive searching in order to find the ideal bank and terms.
Secured loans that require collateral use the item or money in question as risk aversion. With a loan that is unsecured, there is no such risk guarantee for the bank, and the interest rate increases considerably as a result; the average unsecured loan interest rate is two and a half times that of a collateral based loan. As such, the individual’s credit information, and thus the historical reliability to pay back debts, is the major factor concerning the interest rates. Most banks will closely scrutinize credit history in order to determine whether a loan application should be accepted or rejected, and at what interest rate and duration. The cheapest rates ultimately come from the best credit history
Of course, some banks can look beyond credit scores if necessary. Many unsecured loans are used for a quick turnaround, most often by businesses who require the financial means to purchase real estate or commodities that are then upgraded or processed and sold to customers, allowing repayment of the loan. A successful sales pitch with specific details of the costs and profits expected, along with a time line or estimated growth pattern, can be enough to convince many lenders to approve an unsecured loan. The difference between a cheap loan and an expensive interest rate can be as simple as convincing an agency that the money can easily be repaid.
It may be easier to be approved for a cheaper loan using business rather than individual credit, or vice versa. A small business owner can use either credit option to secure a loan if one is less appealing than the other. This, of course, can achieve the loan process, but will not improve the weaker credit line. For some businesses, there are corporations that exclusively extend loans to purchase particular products; for example Dell Computers offers unsecured loans of up to ten thousand dollars to businesses to purchase their hardware and servers without charging an interest rate above market averages.
Finding a cheap loan that is unsecured is no different to finding the cheapest brand of cereal at a supermarket. Shopping around and getting quotes from several sources allows comparisons; some banks may be wooed by credit while others may not. Decide how best to approach certain agencies for a positive appeal.