What is an unsecured loan? When you’re looking for short-term finance, the terms ‘secured’ and ‘unsecured’ tend to pop up a lot. The most basic unsecured loan definition is that it’s a form of finance that can be approved without collateral. Basically, this means that you don’t have to provide an asset like your car or home as security for the loan. If you stop making repayments on unsecured loans, lenders do not have the right to seize your assets.
It may sound almost too good to be true – a loan with no consequences. Yet, that isn’t necessarily the case. Unsecured loans can be a great finance option for a range of reasons, but there are some disadvantages worth considering.
In this article, we’ll run you through everything you need to know about unsecured debt and clear up a few common misconceptions.
If unsecured loans are loans that don’t require collateral, then naturally it’s the opposite case for secured loans. Secured loans are forms of finance that are backed by an asset, like a house (mortgage loans) or a vehicle (personal loans). The asset provided acts as collateral for the loan, so if you default on repayments, the lender can legally repossess your asset. This agreement is usually outlined in your loan contract with the lender.
Unsecured loans aren’t tied to any of your assets, so if you default on your loan repayments then a lender can’t seize your property as payment.
There are several types of unsecured loans. Some common examples of where you might encounter unsecured debt include:
A personal loan is money borrowed from a lender that you pay back in fixed repayments typically over a short period of time. They are not the same as business or corporate loans and can only be used for personal purposes. Basically, this means you could use the loan to pay for expenses like renovations, vet bills, or travel. Ultimately, personal loans can be either secured or unsecured.
All lenders can (and will) report your payment history on both secured and unsecured loans to credit reporting agencies. These agencies collect information on your credit history to calculate an overall score of your creditworthiness.
Late payments or defaults will be listed on your credit report and may impact your ability to get finance in the future. Should you take out a secured loan and a lender is forced to repossess your assets, this will also be recorded in your credit report.
Find out more about our commitment to positive credit reporting, here.
Yes, although it typically isn’t easy to qualify for an unsecured loan if you have a bad credit history. Certain lenders may offer unsecured loans for bad credit, granted they can see that your current financial situation has improved or that you can demonstrate that you can reasonably afford to pay back your loan. In assessing your application, they may look at your income, spending habits and previous debts as well as your credit score.
Loan approval for unsecured loans can be much quicker than on secured loans. This is because there’s no title or any other collateral to evaluate and the loans are usually smaller. In some cases, you could receive the money on the same day of being approved.
Of course, with a lender like Jacaranda Finance, fast outcomes and speedy payouts can be delivered on both secured and unsecured loans.
Typically, interest rates on unsecured loans are higher than rates on secured loans because the lender has a higher risk level of the loan not being repaid.
Loan amounts may be smaller since the lender doesn’t have any collateral to seize if you default on payments.
You may need to have a good credit history and a solid income to be approved for an unsecured loan.
Unsecured loans may be difficult to obtain if you do not have much positive credit history or don’t have a regular income. In this case, you may need to find a co-signer with good credit history and a solid income to sign the loan documents with you.
Jacaranda Finance is the leader in online lending. We provide hassle-free personal loans for Aussies between $300 and $10,000. Looking for an unsecured personal loan? Jacaranda could have the cash you’ve been searching for.
At Jacaranda, we offer unsecured loans up to the value of $2,000. The best part is you can apply 100% online, whenever you like, across Australia. Our team doesn’t think it should take weeks to get approved for a loan. Gone are the days of waiting in long lines and filling out pages and pages of paper forms. When you apply with Jacaranda we’ll cut straight to the chase so you get the cash you need when you need it.
Jacaranda Finance is proud to be a responsible lender. What is a responsible lender? Basically, it means we will never lend cash that an applicant isn’t able to repay. Our team always conduct a thorough and fair assessment of all loan applications. We will do our best to find you an appropriate loan product, however, we can not guarantee approval for every applicant. The good news is, however, that a loan application with Jacaranda is completely free of charge. That means our team will conduct an assessment at no cost. If they are unable to match you with an appropriate loan product you won’t be required to pay a cent.
To qualify for one of our unsecured personal loans you must:
Yes, we will need a few important documents from you. When you apply with Jacaranda we won’t ask you to complete any paper forms – you won’t even need to provide us with a hard copy of your payslips. Here is what we recommend you have handy whilst completing our 100% online application form:
At Jacaranda, our customers are our top priority. Our team know that without you there is no us. That’s why customer service is our top priority. Our team are down to earth and realistic. We believe that every customer deserves to be treated with the utmost respect, regardless of the circumstances. Whether you’ve got bad credit or are applying for a personal loan on Centrelink, you can rest easy knowing that Jacaranda will give you a fair go.
If you’ve got questions our team are always here to help. If you get in touch during AEST business hours we will do our best to get back to you as soon as possible.
Did you enjoy reading this article? Want to learn more about personal finance? Check out our blog for the latest in money and lifestyle tips! Whether it’s getting the lowdown on EOFY sales or learning about how to save money on energy in winter – we’ve got the insights!
Young entrepreneur Daniel Wessels is the CEO and Founder of Jacaranda Finance. Although only in his early thirties, Wessels’ determination and adaptability has led him to successfully pioneer a range of other enterprises both here and abroad.Read More
Jacaranda is 100% online. So, we do not accept applications over-the-phone. However, our friendly team is more than happy to answer any questions you may have.