Cheap, unsecured loans are often sought by people who are in financial crisis. They look for loans that will get them money fast, usually with a quick approval.

Secured loans are tied to a particular asset. A mortgage, for example, is tied to a particular piece of property. Because of this, secured loans are typically paid off over an extended period of time. An unsecured loan, on the other hand, is independent of a particular asset, so it is usually paid off in a shorter period of time. Here lies one of the greatest problems- that in order to successfully pay of a cheap unsecured loan, you need to have the ability to pay off the debt quickly. And because most Americans suffer from a lack of financial planning and substantial credit card debt, paying off a loan becomes significantly more difficult.

Many lenders are willing to work with bad credit, and there is not extensive paperwork to apply for a loan. Sounds convenient, right? But financial institutions aren’t dumb. They may be greedy, but they know how to make their money. If you have bad credit (meaning you are far less likely to pay off a loan in time) and if they can rush through the paperwork, you look like a perfect candidate for a loan- because you’ll owe them a ton of money! In current events, think of the foreclosure crisis. Many banks just suddenly “realized” that thousands of applications were being whisked through the system, without verification or reading the paperwork, yet were being signed. A woman in Florida signed a thousand applications a day- five hundred in the morning, and five hundred in the afternoon, as her full-time job.

So, yes, there are cheap unsecured loans. Yes, they can be relatively easy to apply for, even if you have an awful credit score. But do high interest rates and a good chance of default sound appealing to you? Stay far away, my friends…

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Filed under: Debt Recovery • Loans

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