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What is an Unsecured Personal Loan?

Personal Finances 2 min read

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If you need help covering unexpected expenses, you may be asking the question, “What is an unsecured personal loan?”

An unsecured personal loan is a loan given out without the involvement of any collateral. It is based solely on the trust that the borrower will pay back the money under the terms of the loan.

Unsecured vs. Secured Personal Loans

According to Investopedia:

“A loan that is issued and supported only by the borrower’s creditworthiness, rather than by a type of collateral. An unsecured loan is one that is obtained without the use of property as collateral for the loan. Borrowers generally must have high credit ratings to be approved for an unsecured loan.”

This is different from a secured loan, where an item of collateral such as a vehicle or piece of property is put down to secure the loan. If you fail to repay the loan, the lender takes the item of collateral.

What do Unsecured Personal Loans Cover?

Most personal loans are taken out for things like costly medical procedures, home renovations, and vehicle purchases.

First Bank offers a personal credit line* that may or may not require any collateral. Typically, the better your credit history, the better your chances of qualifying for an unsecured personal loan. Because you’re not risking the loss of any collateral, unsecured personal loans typically come with higher interest rates than secured loans.

Contact First Bank Today

If you need an unsecured personal loan, seek out a First Bank location and speak to one of our friendly associates about getting the money you need.

*Loans subject to credit approval.

———

Sources:

Investopedia: http://www.investopedia.com/terms/u/unsecuredloan.asp#ixzz3sGyigwlj

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