In modern times, getting access to credit may not be as easy as many would think. First of all, it’s important to understand that the obstacles for someone to actually be borrowed money aren’t the same everywhere in the world mainly due to either economical, political or cultural reasons.
Pretty much everyone who reaches their adult life sooner or later end up facing a situation where they need financing to either pay their house mortgage, car, bills, or simply some vacations. There are many different ways for the average person to be borrowed some money, with the most common one being a traditional bank loan. However, not everyone may be eligible for a bank loan due to multiple reasons and that’s where unsecured personal loans actually become a very tempting option in places like the United States, United Kingdom or Norway. Whenever that happens, institutions like STK Finans can guide potential borrowers into the right direction so they make well informed decisions.
So what exactly is an unsecured personal loan? It’s basically a short-term unsecured loan, where the borrower (the person who asks for the money) usually receives a short amount of cash and pays it back right after he receives his next salary the month after. Of course, there are very many variations to this increasingly popular mean of resorting to funding, but the one we just described is by far the most conventional one.
From the borrower’s perspective, one of the downsides of an unsecured personal loan is typically the fees and interest rates associated with it. Being an unsecured loan, the lender obviously demands higher returns for the risks he takes. However and having in mind that some of the people who actually seek for this source of funding are in desperate need of money to pay bills, it’s easy to understand why lenders would often push their profit rates beyond any reasonable figures just so they can capitalize on very delicate situations from their “customers”. As a response to this issue, many states/countries have already started establishing some boundaries and limits on the annual percentage rates (APR) that individuals or institutions involved on unsecured personal loans can charge to borrowers.
This type of loan becomes even more attractive when the lender doesn’t even go through any type of verification for the borrower’s salary or credit. When this happens, we can often witness situations where the borrower is unable to repay his initial loan in the following month, which naturally results in additional fees, costs and interest rates.
It’s also been interesting to notice how this particular type of loans have become extremely popular online lately, with unsecured personal loans ads taking over a big portion of the inventory available in advertising networks when it comes to financial niches. At the end of the day and like everything in today’s aggressive market, regulation will play a key role in determining whether or not unsecured personal loans will remain vital in our economy.
Sources: consumerfinance.gov / forbes.com