There are often many choices for us to get loans whenever we are out of funds. With the increasing popularity of instant loan companies, it has become easier to get a loan from such companies as opposed to bothering family and friends, getting a lot of no and probably getting some embarrassment along the way. However, when you want to take a loan, you have the choice of taking of secured lenders and unsecured lenders. Unsecured lenders are faster but have their dangers. Thus, you must know what the dangers of getting a loan from an unsecured lender are before going ahead.
They mostly give smaller loans
In most cases, you cannot get a big loan from an unsecured lender. Since they are not asking for collateral before they take the loan, they understand that the risk is higher. As a result, they give only smaller loans, even though you might get the opportunity of increasing your loan limit as you continue to pay back your loan on time, there would still be a maximum limit you can get to. Thus, if you are looking for a huge loan, you would have to patronize a secured lender that would provide you with the type of loan you need while you give them collateral in exchange. One of the places where you can get loans from secured and unsecured lenders is at freedom finance UK.
They could easily shut down
Unsecured lenders sometimes have the problem of being able to get their loans back from those who have loaned it. When this happens, they could end up closing. This would leave you with a loan that would become due and you won’t be able to pay back because you do not know how to pay. If they have an automated system that reports unpaid loans at the end of the tenure to the credit bureau, your credit score might start to suffer. To avoid this, you might want to borrow from secured lenders instead who have better chances of survival because they almost always get back their money when the lender pays back or from selling the collateral.
The might compromise your information
Unsecured lenders could compromise your information as a way of trying to force you to pay back. There are instances where the loan company would send messages to all your contacts informing them that you are owing them money and have refused to pay back. This could be very embarrassing and could make you lose opportunities. Imagine the impact such messages could have on your job if the message gets to your current employer or a new employer you are about to start work with. They could make you look unfaithful and unreliable, which could result in losing the job. With secured lenders, however, they would just go after your collateral and would not have to embarrass you by contacting your clients.
They might threaten you
There are some unsecured lenders that when they can’t get you to pay your loans after a few days the loan got due, they might start calling you and threatening you. If you are unfortunate that such an unsecured loan company is owned by loan sharks, they might send some of their thugs after you and the experience might not be favourable. If you are not able to pay back within the period of grace you are given, they might severely injure you or even kill you.
Higher interest rates
Another danger of loaning from an unsecured lender is the higher interest rate. Since they are not requesting for collateral and there is a higher risk they might not get their money back, they give higher interest rate. The interest rate is a way to make up for some of the people that won’t payback.