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What is an Unsecured Loan?

Unsecured loans are a form of a personal loan that involves borrowing money without the use of collateral.

Since an unsecured loan does not require collateral, this form of borrowing involves more risk for the lender. Due to this added risk, lenders are likely to charge higher interest rates for unsecured loans, and they’re also more likely to require a good credit score to receive approval.

On the bright side, unsecured personal loans are typically easy to acquire quickly and they also usually come with relatively convenient repayment periods ranging from approximately two to five years.

The biggest downside to unsecured loans is that they aren’t easily to get if you have bad credit.

In fact, anyone with bad credit who tries to get an unsecured loan is likely to an extremely difficult time getting approved for an unsecured loan, and they’re also likely to end up paying a much higher interest rate than they could acquire via a secured loan.

If you do have credit problems, then secured loans are likely going to be a better option for you, and that’s where City Loan Long Beach can help.

Our car title loans are fast, easy and convenient, and they come with substantially better repayment terms compared to the typical unsecured loan. To find out how much you can get, call us now at 888-238-9085.

The rest of this post discusses the pros and cons of unsecured loans, then compares them to other popular forms of short-term installment loans.

Benefits of Unsecured Loans

If you are in need of fast cash, you may need to consider an unsecured personal loan.

Unsecured personal loans are fast, oftentimes much faster than competing loan options, but definitely faster than selling or pawning personal possessions in order to raise cash.

Unsecured loans can also be discharged in bankruptcy, unlike secured loans and student loans.

The reason people think of unsecured loans as being one of the most convenient forms of lending is that no collateral is required to “secure” the loan, which is great for people who don’t own a home, or a vehicle, or other valuable assets.

Unsecured loans are also quite flexible, in that the money raised via this form of lending can be used to pay for a wide variety of expenses, including:

  • Rent/Mortgage Payments
  • Bills of any Type
  • College Tuition
  • Medical Costs
  • Home Improvements
  • Business Loans
  • etc.

Disadvantages of Unsecured Loans

Unfortunately, it’s not all good news when it comes to unsecured loans, because they have some relative downsides as well.

One of the most important requirements for getting an unsecured loan is having a good credit score, so anyone with problems on their credit report due to late payments, loan defaults, car repossessions or bankruptcy is going to have a difficult time receiving approval for an unsecured loan.

There certainly are some trustworthy lenders who offer unsecured loans online for people with bad credit scores, but most of these lenders will require you to have a co-signer with excellent credit, so it’s not really as flexible an offer as it seems at first glance.

In addition, the Internet is full of lenders offer unsecured loans, but who really shouldn’t be trusted. Plenty of unscrupulous lenders promise excellent rates, huge loan amounts, quick turnaround times and other benefits, but you’ll want to be extremely cautious of any lenders promising to offer “short term loans for bad credit” or “unsecured loans no credit check required”.

Oftentimes, these loans come with the worst repayment terms, including enormous interest rates, terrible repayment terms, and all sorts of hidden fees, penalties and other costs.

How an Unsecured Loan Works

Since unsecured loans don’t use collateral and are backed only by the borrower’s promise to repay the lender, credit history and credit scores are important during the application process.

After you’ve filled out an application with your personal info, you’ll need to authorize the lender to perform a credit check, and you’ll need to provide them with a proof of income.

Once your credit check has been completed, you should be notified in writing as to whether or not you are approved for the unsecured loan.

In some cases, it is possible to apply online for an unsecured personal loan, and it may even be possible to get full approval and have the money directly transferred into your bank account without ever having to leave your home.

If you’re still interested in obtaining an unsecured personal loan, even after knowing about all of the downsides, then the safest way to proceed in finding one would be to contact a local bank, credit union, or peer-to-peer lending website.

Be careful though, because interest rates vary wildly, loan terms have considerable range, and you could end up paying far than you would have to with a comparable secured loan.

Types of Unsecured Loans

Credit Card

Credit cards are probably one of the most common ways of borrowing. While a credit card isn’t technically a loan, the credit that you use will act as the loan.

With a credit card you won’t receive a huge lump-sum of cash at the beginning, like you would with an unsecured loan, but you’ll get access to funds which can be spent just like regular cash. A credit card acts as a pool of money, allowing you to borrow whatever you need whenever you need it.

Some credit card companies award credit cards to people with poor credit, but those typically come with extremely high interest rates, and relatively lower credit limits.

To get a credit card, you can go directly to a financial institution, apply online or simply check your mailbox; almost everyone receives credit card offers via mail these days!

Payday Loans

If you are employed and receive a paycheck on a regular basis, then you may qualify for a payday loan.

Payday loans are another popular type of short term loan, and they’re especially popular for people with poor credit. However, you’ll need to be cautious with payday loans, as they’ve been outright banned in several states, and are widely regarded as a form of “predatory lending” by many people in the financial industry.

The way that a payday loan works is that a lender will award you a loan based on the value of your next paycheck, and you’ll be forced to pay it back in full, plus fees and interest, by the time you receive your next check.

Does that sound crazy to you? It should! If you’re already having money problems – how could you be expected to raise the cash to pay off the loan in just two weeks? Many people who take out payday loans find themselves in the difficult position of not being able to pay those loans back in time, which leads to interest rate hikes, penalties, fees and all other sorts of added costs.

Traditional Bank Loans

Traditional banks typically offer the best interest rates, but they also have far stricter requirements for the applications process, which can make it extremely difficult for people to take out unsecured loans. Due to the added scrutiny spent reviewing credentials of people applying for unsecured loans, the application process at a traditional bank could last anywhere from up to several weeks to even several months. If you’re in a hurry to raise some cash, then a traditional bank probably won’t be able to help.

Student Loans

Student loans are unsecured loans that are made for those who want to pursue higher education. Student loans offer:

  • Flexible Repayments
  • Grace Periods
  • Interest Subsidies, etc.

However, the problem with student loans is that they’re typically only provided to cover the costs of education-related expenses, and they’re only available to people enrolled in college courses.

If you need to borrow money to pay for college, then look into student loans, but if you’re looking to fund any other form of purchase of financial cost, then you’ll need to look elsewhere.

Peer To Peer Loans

Peer to peer loans allow you to borrow from individuals, instead of traditional financial institutions.

This form of lending is particularly popular online, so if you want to try it out, simply type “peer to peer lending” into Google and see what you can find.

A peer to peer loan is generally a fixed rate installment loan, and can come with competitive interest rates. However, in many situations you will have to have a good credit score to get approved, so don’t count on this form of lending unless you’ve got perfect credit.

Secured Loans vs. Unsecured Loans

The main difference between an unsecured loan and a secured loan is that secured loans do require a form of collateral. While that may sound like a bad thing, it’s actually great for the borrower (you), because it reduces the risk to the lender (whoever you borrow from), which allows them to provide you with money at a cheaper rate.

Here is a brief comparison between a secured loan and an unsecured loan:

  • Since unsecured loans  come with more risk, they tend to come with higher interest rates and more expensive origination fees
  • Unsecured loans have stricter borrowing requirements (you’ll need a good credit score), since lenders have to be more careful when deciding who they approve for a loan
  • Unsecured loans usually can’t raise as much as secured loans, since lenders are less willing to dole out large amounts of cash without the protection offered by collateral

The difference between secured loans and unsecured loans is entirely based on the fact that one form of lending involves collateral (secured loans), while the other does not (unsecured loans).

With secured loans, lenders don’t have to worry as much about a borrower defaulting on their debt, since the lender can simply take the collateral to cover their costs.

Collateral is what ensures that a lender won’t lose everything if the borrower is unable to pay back their loan, and it’s the only thing that protects lenders from going bankrupt when their borrowers default.

Types of Secured Loans

Now that we’ve established that secured loans are probably a better way to borrow money, it’s important to point out what they look like.

Secured Loans come in many different forms, including mortgages, lines of credit, car loans, boat loans, title loans, etc. One of the best types of secured loans is the car title loan.

Car Title Loans

A car title loan, also known as an auto title loan, pink slip loan or car equity loan, is a type of secured loan where your vehicle is used as collateral for a cash loan. Car title loans are fast, simple and convenient, especially when you borrow from City Loan Long Beach.

The way our car title loans work is that you will give us temporary possession of your car’s title in return for a cash loan based on the value of your vehicle. After you pay back the loan, we’ll return the vehicle’s title to your name.

Our car title loans are a great way to borrow money because we won’t require you to leave your vehicle with us, park it in a neutral garage, or even leave it in your driveway. As long as you continue making your monthly payments, we won’t place any restrictions on your driving!

In addition, our car title loans are a better option for people with poor credit, since the presence of collateral makes it easier for us to get approval for your loan. Accordingly, you should be able to get a better interest rate, and better loan terms, from us than you could find from an unsecured loan lender.

City Loan Long Beach Can Help

If you're looking for the best service in the industry then look no further. We treat everyone of our customers like royalty. No matter what you've been told in the past, we'll do our best to work with you and get you the money you need.

There's a good chance we can help, even if you've been previously denied, but the only way to find out is by contacting us today.  Call us at 1-888-238-9085. Our loan officers are standing by waiting to answer any questions you might have.

Find a City Loan Near You

City Loan offers the best car title loans in California, Utah, Arizona, Missouri, New Mexico, Texas and South Carolina. Our service area is constantly expanding and that means that even if you're state isn't listed here right now, it may be in the future. 

Are you located in the Long Beach area? If so, drive by and meet one of our loan officers at our main office located here:

3431 Cherry Ave,
Long Beach, CA 90807

When it comes to fast and efficient service, City Loan Long Beach has eveyrone else beat. Don't waste your time with the other guys. Stop by our Long Beach location or give us a call to find out how we can help!