Unsecured loans are popular finance products. Borrowers should understand what an unsecured loan is and how they work prior to applying for one.
Unsecured loans are usually offered by banks or other finance businesses. The repayment term of an unsecured loan is usually up to five years, although some lenders may offer loans repayable over a longer period, sometimes up to 10 years. Unsecured loans are available with fixed interest rates and with variable interest rates. Borrowers taking out an unsecured personal loan are not required to provide security or collateral against the loan.
An example of an unsecured loan would be to borrow $10,000 at a fixed interest rate, with the total loan cost repayable over five years. As the loan is unsecured, failing to make the necessary repayments could lead to an account falling into default and the borrower’s credit history being effected.
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