I’m sure you’ve seen or heard the advertising lines: “Are you strapped for cash” or “Do you need cash now?” What they are selling are unsecured cash loans, and these loans can provide you with fast cash. While there are benefits, there are significant drawbacks as well. This article will give you a better understanding of what unsecured cash loans are and the pros and cons associated with them.
Unsecured Cash Loan Vs. Secured Loans
Secured loans are backed by an asset or property, such as a vehicle or home. Oppositely, an unsecured cash loan is not secured by any asset and relies on the borrower’s promise to repay the loan. Obviously, it’s risky for the lender, therefore the lender charges high interest and late penalties for taking such a risk.
Common Unsecured Cash Loan Types
Payday Loans: or cash advances, are loans repaid using your next paycheck. They generally do not require a credit check and are easy to get. The interest rates are steep. Penalties can be astronomical. Therefore, if you can avoid taking out a payday loan you should. They are best avoided unless needed in emergency situations where no other sources are available to you.
Credit Cards: are essentially unsecured cash loans. Of course you can only borrow money until you reach your credit limit. Interest rates vary, but are typically high.
Student Loans: Student loans may have an interest rate or no interest rate attached to them. Sometimes they are taken out from private sources or from government sources. With student loans, there are some programs that may assist you in eliminating your student loan debt.
Personal Loans: A personal loan is an unsecured cash loan from a bank, financial institution or individual (for example, a business that offers its own credit program). Typically these can have high interest rates, but some personal loans may have no interest rate attached to them if repaid within a certain time frame, such as, “Same as cash” offers.
Unsecured Cash Loans – Pros
Unsecured Cash Loans – Cons
The best advice is this: if you can get good terms with a secured loan, that is a much better option than an unsecured cash loan. If you have no option other than taking out an unsecured cash loan, know all the terms, interest charges, fees and penalties associated with the loan.
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