Do You Believe In A Risk-Free Unsecured Loan?Fast Action Finance
Many people have a common misconception that getting yourself an unsecured loan means that there is no risk on your side as the borrower. However this is a myth and it is not true. This idea comes off from the fact that as the borrower in the loan itself, you donâ€™t have to place any of your items as collaterals or as assets being the assurance for the loan amount to be paid.
Although there is no such property or alternate value or property placed on par to support your loan, this does not mean that your lender cannot sue you or take proper legal actions against you if you do not pay up the money borrowed with the respective interest rates and fees in the given time period.
Therefore, it is not right to think that since it would be an unsecured loan without any assets placed for surety, there is nil risk for the borrower.
Why did this idea come about?
There are some reasons why people have started assuming that these loans bring about no risks to the borrower. One main reason is because of the other concepts of collaterals, sureties, re-possession and foreclosure which are available in secured loans which make us assume that there is more money involved in a secured loan thus more risky for the borrower to engage in it. Most importantly, having less than adequate knowledge about credit laws can also be another factor why people have this common misconception that they hold.
Along with the misunderstanding that borrowers face no risk in borrowing money in a loan like this, there is also another misunderstanding that lenders have a few ways available to them to recover any losses that they make. Such ways include having a wage garnishment, using sheriffsâ€™ sale of property to fulfil the judgment, and to go on to taking up lawsuits.
What happens if as a borrower for an unsecured loan, you cannot pay up?
If you are a borrower for this loan, it is dangerous and foolish to think that you would be at no risk if you cannot pay back the money that you have borrowed. The resulting consequences of you not being able to pay up is as bad for both a secured and an unsecured loan and no one is any better than the other. Both ways you are going to be able to prepare for the loss you are going to make which would be equivalent to the amount you have borrowed or even more sometimes.
What happens when you cannot pay up after borrowing money under an unsecured loan is that firstly, your credit score would go down by a lot of points. Your default is going to stay on your record for at least seven years and it can even be renewed by the lender if your case is not sorted out in that seven years. This way they can keep renewing your default for a lifetime and they can prevent you from engaging in most of other financial transactions for the rest of your life. This means you might not be able to take a loan to buy a house for your family, or to go on a holiday, or even to drive your vehicle.
When you default on any kind of loans, you are immediately increasing your insurance premiums, deposits you would need to make for security issues, all your down payments and your minimum amounts due for items. This is because of the breach of trust you have shown through your default.
Also, if you default on your loan, it affects your chances of getting properties, employment, and many other things because you are seen as something not to be trusted and as a credit risk.
What is really true about unsecured loans?
The truth is that every loan comes with its own risk. There is no such thing as a risk free loan. As long as there is a lender, there will be a risk associated with your loan. Here we are going to take you through a few things which are indeed true about unsecured loans.
In unsecured loans there isnâ€™t a single asset assigned to your loan amount. In other words, you are not placing any surety or any of your assets as a backup or collateral for your loan amount borrowed. You can put any of your assets on sale for you to fulfil your loan amount if it calls for you to sell them to pay up your loan amount.
When you take legal actions for an unsecured loan, it might take longer than usual compared to secured loans, but it is still available to be done and it still can be done for these loans. Loans that are unsecured are as important and can carry as much weight as secured loans no matter what the myths are. If you default on unsecured loans, you are going to cause as much as damage as you would face if you default on secured loans.