Many of us, while browsing through the internet best mobile apps to get quick loans online in Nigeria, we regularly come across the phrase ‘Unsecured Loans’.
It’s a term that might cause doubts and uncertainty to those coming across the term for the first time due to what the name implies literally.
However, we can confirm that this is not the case as you are under no risk if you are planning to obtain unsecured loans.
This article dispenses all information regarding loans that are tagged “unsecured”.
What Are Unsecured Loans?
Unsecured loans are simple loans that are granted without requiring you to put up collateral, unlike traditional banks requires.
Collateral is a form of a pledge in order to obtain the loans, and banks collect collaterals to ensure you will repay the loan.
Through an unsecured loan though, you can be granted loans if you have a good credit history, credit score, and income, without you being required to pledge any assets like cars, landed properties or any other property of high value.
Under this type of loan, lenders have no choice if borrowers fail to repay loans given to them, this is one of the major reasons their loan rates are high due to the risks involved.
They have no right whatsoever to seize any property you have if you can’t repay, but you can be reported to the credit bureau of Nigeria, who might ban you from obtaining loans through any other loan platform in Nigeria.
These loans are also termed “signature loans” because your signature on the loan agreement is all that binds you to the agreement. You promise to repay, but you don’t back up that promise by pledging assets.
There are a lot of benefits you can gain through unsecured loans such as flexibility where you can utilize the loans you obtain as you see it fit.
This type of loan also gives you a lot of options such as quick loans, education loans and business loans with each given at different interest rates and terms.
You can easily choose the one that is right for you; and while interest rates are high generally in unsecured loans, you can still find platforms that offer lower interest rates in Nigeria.
Types of Unsecured Loans
There are four different types of unsecured loans available in Nigeria. They include:
Guarantor Loans are created for borrowers with a bad credit history or score which might be due to issues with past loans.
This is a type of unsecured credit where the borrower is required to bring a guarantor before the borrower can be granted the loans.
This Guarantor is somebody who considers himself skilled and prepared to repay the loans on the off chance that the borrower neglects to.
Before a Guarantor can be accepted, in any case, he/she is required to have a decent, clean credit history and typically a landlord (homeowner) that is equipped for repaying the advance.
Guarantors are subject to repay all the loans in case the primary borrower neglects to repay.
This is the reason it is generally fitting to look for legal exhortation before proceeding to be a Guarantor. A case of this type of loan in Nigeria is Fint loan.
Peer to Peer Loans
Also alluded to as P2P loans, they are loans that individuals and investors called lenders, give. The lenders and borrowers are typically matched together through an online platform.
People with an additional cash offer to lend cash to borrowers and businesses through online services.
Thus, lenders can win more significant yields on investment contrasted with savings and investment services offered by customary banks.
Also, borrowers can acquire cash at lower interest rates, considerably after the P2P lending company has taken a charge for giving the match-making platform and credit verification of the borrower.
Otherwise called crowdlending, many peer-to-peer loans are unsecured loans. However, loans are generally granted to businesses.
Different types of peer-to-peer lending incorporate student loans, commercial and real estate loans, payday loans, just as secured business loans, leasing, and factoring.
It is another type of unsecured loans where the borrower, usually salary earners, are trusted to repay their loan balance in full on their next payday. However, most lenders, in reality, permit clients to pick their own repayment date.
Payday Loans can be an extremely expensive approach to obtain cash and is advisable to be utilized for emergencies.
A Payday Loan like some other type of unsecured loans should just be obtained by borrowers who are sure that they can repay the loan balance within the concurred time of the credit.
When taking out a Payday Loan, there are situations where lenders may require a borrower to consent to and set-up a persistent payment authority or repeating payment.
This permits the moneylender to take what is owed legitimately from the client’s bank account on the day that it is due.
Examples of platforms that give this credit in Nigeria incorporates Kiakia loans, Branch loans, and Carbon loans.
Getting Signature Loans Online
There are various loan platforms in Nigeria that provide unsecured loans online.
They give loans at ranging interest rates, offer different types of loans from personal loans to business loans and also quick loans depending on the type of loan you need.
Examples of unsecured loans you can find online through their apps or through their website include Branch loans, Carbon loans, FINT loans, Kiakia loans, Creditville loans, Renmoney loans, FairMoney loans, Palmcredit loans etc.
Differences Between Unsecured and Secured Loans
There are some significant differences between secured and unsecured loans, which a lot of people don’t know about.
So, how exactly do secured loans differ from loans that are unsecured?
- Through secured loans, you can obtain a huge amount of money as this loan is secured through collateral which is one of the major requirements for secured loans.
- Secured loans are usually taken by large businesses or companies. Unsecured loans provide a limited amount of money to borrowers, due to the high risks involved as these loans are obtained without any form of collateral.
- Secured loans usually come with lower interest rates compared to unsecured loans whose interest rates can sometimes be outrageous.
- Loan terms in secured loans can take long within the range of 1 – 10 years while unsecured loans don’t go over a year usually.
- Taking a secured loan usually takes a drawn-out process before it can be approved, tons of paperwork and guarantors are required.
- Unsecured loans require majorly a smartphone with internet access, a bank account with Bank verification number, a passport photograph, to obtain a loan.
Failure to repay secured loans results in the seizure of the collateral provided by the company or individuals until such entities can repay the loan default.
- With unsecured loans, you stand a risk of being reported to the credit bureau and this simultaneously means you will most likely not be able to borrow from any other loan platform.
In the worst-case scenario, you might face a lawsuit if you don’t repay your loans on the agreed date.
Summary Notes About Unsecured Loans
No matter what type of loan you need, either you’re considering obtaining secured or unsecured loans, or any other type of funding, it’s important to know all the terms.
Do not append your signature to any loan agreement if you’re not certain and convinced you’re able and ready to repay.
Obtaining a loan is a risk, however, with the right information in hand, it will be easy for you to discover the best option of loan either for personal use or business altogether.
The information provided in this article can be a guide, especially for first-time borrowers to know what unsecured types of loans are all about, their advantages, disadvantages, types and also platforms where you can obtain these loans in Nigeria today.
It is advisable to our readers who plan on taking unsecured loans online to ensure they take loans that they need and can easily be repaid within the loan term.
Failure to not repay loans can result in severe penalties or a lawsuit at most, which nobody wants.
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