If you need money to cover an unexpected bill or emergency repair, you may be considering a loan. While secured loans are backed by collateral like a car or home, unsecured loans are an option that can allow you to borrow money without providing collateral upfront. These types of loans can often be completed quickly if you're approved based on your creditworthiness. Here are three types of unsecured loans you should know about and how they work.
Cash advances
As long as you have a steady source of income, a cash advance enables you to take out a short-term loan that you'll typically need to repay in two to four weeks. When you apply for this type of loan, you'll need to prove that you have a steady income, a checking account, and are at least 18 years old.
Since cash advance lenders have less strict credit requirements, cash advances are generally more accessible if you're working to improve your credit score. Plus, once approved, you can often get funds quickly and use your upcoming paycheck to pay back the balance. Cash advances can be a good option if you need some extra cash to cover expenses before your next paycheck.
Installment loans
Installment loans are short-term loans that give you a lump sum of money you can then pay back in fixed monthly payments over a set time period. One of the most common forms of an unsecured installment loan is a personal loan.
The primary benefit of a personal installment loan is that you can use them for any purpose, like home improvement, debt consolidation, or paying for your vacation. Although many lenders will check your credit score, some have more lenient requirements and will consider other factors like your income and employment history when deciding whether to approve you.
Lines of credit
A personal line of credit is a type of unsecured loan with a variable interest rate, similar to a credit card. The benefit of a line of credit is that you can use the funds as you need them, then pay them back when you're able to. In addition, they don't require you to take a lump sum as with an installment loan.
Since lines of credit are unsecured, lenders will likely consider factors like your credit score, income, and credit history when deciding if they'll issue you a loan. Luckily, there are many lenders who don't require you to have a great credit score to qualify. It pays to shop around to see which lender offers the right interest rate and payment terms.
The bottom line
If you're looking for an unsecured loan where you don't need to provide collateral, there are many great options out there. Based on your unique financial and employment situation, a cash advance, installment loan, or line of credit might be a good short-term loan solution. Whichever option you choose, it's essential to do your due diligence and take out a loan that you can pay back within the time provided. Doing so can alleviate unnecessary fees and interest charges.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
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Original Source: 3 Types of Unsecured Loans You Should Know
