Traditional, secured loans are very safe for the lender, but not so much for the borrower. Not only are they difficult to come by due to tons of paperwork and red tape, there is also the possibility that the borrower may lose whatever assets they used as collateral in the event they are unable to pay the loan. This greatly reduces the risk to lenders, but borrowers have to deal with the headache of obtaining the loan as well as the fear hanging over their heads that they could lose property such as a home or a vehicle.
Unsecured loans are loans that do not require collateral of any type. Since they are riskier to the lender they may only be available in lower amounts and with higher interest rates. This is generally acceptable to borrowers who are not able or not comfortable with putting up collateral. The uncertainty of things to come often makes tying necessary assets to a loan much too daunting. Another plus is that due to the small amount and reduced red tape associated with unsecured loans, the funds are often in the hands of the borrower much faster.
While it may seem that a payday advance does use collateral, as it must be paid from the next paycheck, they actually resemble unsecured loans much more closely. They are much quicker to process and easier to get than secured loans, and they are not secured by any assets currently in the borrowers’ possession. They do not have to fear losing their home, their car, or anything else as a result of not paying the loan. Plus, the fear of not paying back the loan itself is even much less as the amount needed to repay the loan is often automatically drafted from the borrower’s checking account at the time their next check is received.
There are other options for unsecured loans out there. The internet is full of companies that offer these types of loans. Some of them are legitimate, and some of them are not. Pay attention and shop around. Terms are not going to be as favorable to the borrower as a secured loan, but some will be better than others. Take the time to find the loan with the terms that best suit your needs and use the time it buys you wisely, enjoying the fact that your assets are not at risk.