Unsecured Loan

Unsecured loans are also called signature loans. Commercial paper is an example of an unsecured loan.

An unsecured loan is a loan that is not backed by collateral, which means the lender has no entitlement to any of your assets in the event that you, the borrower, fails to make the loan repayments.

Unsecured personal loans can be used for just about any type of purpose - car repair, vacations, school tuition, home improvements, paying bills, etc. However, some lenders do have specific loan products for specific purposes (such as a car purchase). With an unsecured loan, your approval will be based on your credit history or employment status. Interest rates will vary depending on these factors.

The money you receive from unsecured loans is paid to you in one lump sum and can be used for whatever reason you wish. You may need the money for an education fund, a wedding, home improvements, or a well-deserved vacation. If you do own a home you may consider a Home Equity Loan, which could offer you lower interest rates than personal loans offers or a bad credit home loan. Unsecured loans can range anywhere between Ł500 and Ł25,000. (If you need a loan for a higher amount than this, you may be interested in a Secured Loan) Repayment terms for unsecured loans are between 6 months and 25 years, depending upon the lender and the loan amount, but terms of 6 to 60 months are most common.

Disdvantages:
Even though unsecured loans are not directly secured against your home, if you do fail to keep up repayments, the loan provider can pursue you for the outstanding balance which could ultimately, put you home in jeopardy.

Also, unsecured loans will normally carry a higher interest rate than a secured loan, and you, (the borrower) must have a high credit rating to receive an unsecured loan. Unsecured loans may also take longer to arrange.

If you aren't a homeowner, or if you are a homeowner but have insufficient equity in your home, aquiring an unsecured loan can prove to be difficult and costly.

Federal Laws
Major laws that govern financial institutions and protect individuals in their financial dealings

Organizations

Fannie Mae
Freddie Mac
Ginnie Mae
Nellie Mae
Sallie Mae

Consumer Info

Credit Bureau
Credit Report
Directory of Federal Agencies
Federal Trade Commission (FTC)
Identity Theft
Predatory Lending
Repair Your Bad Credit
Truth in Lending Act
Borrowers Beware

Miscellaneous

Private Mortgage Insurance (PMI)
Prepayment Penalty

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