Unsecured loans are very common ones when it comes to small loan, that is, loans having a smaller denomination, or a smaller principal amount. Such smaller loans are lent to people who have both good and bad credit. Unsecured loans are however, the best loans that can be lent to people due to the fact that it proves to be advantageous to all, the lender, borrower and even the economy.
Such a loan is also paid off rather quickly, and there is also no need to have a security pledged with the lender. So, this was basically the sum total of the principle features of the unsecured loans. A good credit means that the credit score of the borrower is above 700, according to the FICO credit score range.
An unsecured loan is quite convenient, as there is no need to find a valuable asset to be pledged with the lender. The only drawback that remains is that there will be slight limitation about the principal amount that can be borrowed by the people. The following are some of the common unsecured loans for good credit.
Cash Advance Loans and Payday Loans
The cash advance loans and payday loans are loans which can be borrowed by people in between two paydays to cover up cash crunches. In most cases these loans are unsecured, however a good credit rating, plus a good credit history means that a loan will have a low rate of interest. These loans are usually issued in accordance with the wage rate, that is 40% of the monthly income.
These loans are also often paid on, or after, the payday of the person which gives them their name. A common method that is followed by many lenders for the repayment procedure, involves the issuance of a check that is dated as per the payday. The lender en-cashes it after the borrowers payday. This kind of unsecured loan is granted by many private lenders.
Unsecured Personal Loans
The good credit score means that the rate of interest will also be lower. Thus, in the unsecured loans category, personal loans are the best ones. However being a personal loan, one cannot have a very high principal amount (amount that is actually borrowed).
There are some other loans that will be granted to people who stand in the good credit category. In some cases, auto loans are given to people with good credit without a security. Some other loans, such as home improvement loans, student loans and short-term loans are granted without a security, but the aforementioned drawback of limit, on the borrowed amount, remains universal.
The lender, in most cases, will check the credit report, credit history and credit ratings. Apart from that, the rate of monthly income is also checked. The principal amount and the installments depend upon the monthly income rate. It must be noted that the unsecured loans may be declined, or a higher rate of interest might be charged, in cases where the credit history is not that good.