Advantages and disadvantages of unsecured loans

Many people like borrowing personal loans simple because there are unsecured. Put simply, an unsecured loan is not attached to any form of property hence it is preferred mostly by borrowers. Having said that, it is important for any lender out there to know that these loans are bigger risks for lenders and, as such, unsecured loans have higher interest rates than secured loans.

Worth noting is that as while the interest rates are higher, the rates will be lower compared to those of credit cards. This article will list down the advantages and disadvantages of unsecured loans:

Advantages

Unsecured loans take fast to process, the loan application is cheap and takes minutes if not a few hours to be approved depending on the institution
Little or no documentation is required during the application
Homeowners and non property owners have the platform to apply for this loan facility
one can apply for an unsecured loan in the absence of a collateral, it means you can apply for this loan without attaching your property
Unsecured loans have a fixed interest rate and this means monthly installments till the end of the payback period

Disadvantages

Unsecured loans have a high interest rate and this is because there is not collateral attached to them. A creditor must have a clean record for him to get low interest rates
With unsecured loans, large amounts can be borrowed and borrowers can only get a maximum unsecured loan of R150 000 and it’s rare for them to rise to just R250 000
The loan has to be paid within the specified period of time which is set up by the lender
The terms and conditions of the repayment time are strict; only the lender has the power of deciding the amount and repayment structure of an unsecured loan, which the borrower should adhere to
The application process is generally strict, borrowers whose credit history is bad are not welcome to apply for an unsecure loan

The above are the pros and cons of unsecured loans and borrowers should furnish themselves with these facts before they make an application.