One thing that every businessman looks for during the early stage of their startup is an investment. There are various ways to collect funds for business. However, there is a type of loan that most people have no idea and that is unsecured loan.
Basically, an unsecured loan is a type of personal loan that does not require any kind of collateral. Therefore, you are totally safe from losing any of your assets in case you default. However, the amount of interest charged for an unsecured loan is generally higher than the typical loans that range from 11% p.a. up to 26 p.a. that also includes a certain proportion of the principal amount of the loan.
So, if you are planning to apply for an unsecured loan for your business, then it is important that you learn a lot more about it. The unsecured loan comes with several benefits as well as drawbacks. In the article, we have mentioned some of the useful facts about unsecured loans that can really help you:
1. Online Availability
Today, there are plenty of lenders out there that are working online. To apply for the loan, you have to just visit their website and fill the online application form and submit it along with your ID, address proof, and other credentials related to your bank account and employment.
2. Competitive Interest rates
The rate of interest charged on unsecured loans ranges from 11% to 26% and is quite affordable compared to credit cards. Basically, there are two types of interest rate- one is fixed and another is floating. Floating interest rates vary according to the change in the market, whereas the fixed interest rate remains fixed irrespective of the change in the market.
3. No collateral
One good thing about unsecured loans is that you don’t have to pay any collateral in case of default. Therefore, you don’t have to put any valuable asset of yours in order to secure the loan. Generally, in case of secured loans, the applicants are asked to pledge any assets like their car or home. Well, if you fail to repay the loan, the lender will seize that asset.
4. Multipurpose use
Unsecured loans are known for their immediate availability and this is the reason why they are used by many people during the time of emergency. However, the emergency doesn’t need to be related to something sad. You can apply for unsecured loans to buy a new home, collect funds for your startup business, travel to a foreign destination for a holiday, and to buy an expensive gift for your special ones in life.
5. Lower your debt
If you are under the heavy burden of an old existing debt that is piling up day by day, then an unsecured loan is the best way to get rid of them. After you have cleared your debt, there will be a new loan with a new interest rate and new terms in front of you, so make sure that you repay the new loan in time.
6. Final verdict
Summing it up all, an unsecured loan is definitely one of the best ways to get money to get rid of your old debt or for your startup funds. However, you must also repay the loan in time as they are given for short term.