Personal Loan Without Collateral: Know Its Advantages And Disadvantages
Personal Loan is a type of debt that serves as a financial assistance for a wide variety of purposes, such as payment of credit card balances, acquiring a new vehicle, funding education, starting an investment, and medical expenses, travel, among others.
Just like other banking products, a Personal Loan has two types—Personal Loan with collateral and Personal Loan without collateral.
Types of Personal Loan
A non-collateral personal loan is a type of a Personal Loan that does not require its borrowers to have a collateral or payment security before applying for such loan.
Opting for this type of loan does not involve risking your personal asset, business venture, or other investments, making it a wise choice for funding any of your financial problems quickly.
Personal Loan in the Philippines without collateral is being offered by different lending companies across the country. Each lender offers the best cash loan rates that suits to every type of budget.
Compared to a secured loan, cash loans with no collateral has its own pros and cons. Before applying for a loan, make sure you know the benefits and downsides of choosing a cash loan in the Philippines without collateral.
Here are some of its advantages and disadvantages.
What are the advantages of a non-collateral loan?
Since this type of personal loan does not require any collateral or payment security, opting for an unsecured Personal Loan is less risky. In case you won’t be able to repay your monthly amortization, you don’t have to worry about losing your personal assets or investments.
A cash loan that requires a collateral may tend to have a longer application process since the lender needs to review various documents and requirements. With an unsecured personal loan, the application process is often faster, which usually takes for about five to seven days upon receiving of the requirements. Hence, you can get your loaned money faster.
Applying for a cash loan without collateral requires you to secure a valid billing address, proof of income (e.g. payslip or COE), and proof of identity (e.g. government-issued ID, company ID, or TIN).
What are the disadvantages of a cash loan without collateral?
Higher interest rates
Since an unsecured cash loan does not provide any security for lenders, they charge a higher interest rate. This means borrowers will have to pay a higher interest rate for their loaned amount compared to a secured cash loan.
Larger loan payments
A non-collateral cash loan requires a larger loan monthly payment. Furthermore, the repayment period for unsecured personal loan is shorter than a secured personal loan.
Just like managing your money, borrowing money is a huge responsibility. Make sure that you understand all the conditions given by your chosen lending company. Ensure that you afford to repay the loan to avoid any financial trouble.
After all, a Personal Loan should act as your financial assistance to any quick fix that you might need—and not otherwise.