What Does Unsecured Mean? Part ThreeFast Action Finance
Thus if you are unable to pay back your personal loans, the lenders lose money of course and that’s what they are trying to avoid with various strategies.
One way they can do this is to increase the interest on the loan, and you will find that many unsecured loans are more expensive as a result. This way they protect their investments by making more back across the board. Thus if one person fails to pay back their unsecured loans, the company still makes money from all of the successful loans that have been repaid and this covers their losses.
Of course the downside to that is that each borrower pays more for their unsecured loans, but at the same time there are advantages to this.
Secured loans are another way that the companies can protect their investments and make sure that a few people going bust don’t damage their business irreparably. To this end, a secured personal loan is one that provides a guarantee of sorts for the lender and thereby ensures that they get their investment back.