4 Key Tips for negotiating an Unsecured Loan Agreement.
An unsecured loan can simply be defined as a loan where the borrower does not put any collateral or security in exchange of the loan sum advancement. The loan in most cases is advanced by the creditor on the strength of the individual’s/entity’s creditworthiness. Examples of unsecured personal loans include; credit cards, mobile lending apps or student loans.
Unsecured personal loans can offer much needed alternative to the rigorous bureaucratic procedures of obtaining secured loans from banks and offer credit lines to low-income households, but due to their nature borrowers have to be alert to various issues before entering into unsecured loan agreements.
High Interest Rates.
Unsecured loans are characterized by exorbitant interest rates. The desperation of most borrowers looking for quick advancements invites lenders to charge such interests rates. Accordingly, borrowers should enquire from various unsecured lenders and seek to engage the lenders with the lowest rates.
Precomputed interest rates vs Simple interest rates.
Precomputed interest basically calculates your interest using the original payment schedule, regardless of how much of the loan you have really paid off. While simple interest calculates the interest from the loan amount due at the particular time.
Evidently, borrowers should be inclined to engage with lenders charging simple interest vis a vis precomputed interest rates.
Borrowers should insist on the lender granting an adequate respite period before mandating repayment. Such a period would allow the borrower enough time from the date of disbursement to allow for consistent pay offs of the loaned sum.
Engage legal professionals.
Borrowers should engage legal professionals with expertise on the subject to ensure the potential risks or loopholes in the terms and conditions are apparent and disclosed prior to entering the agreement.
In conclusion while unsecured loan agreements serve as a resourceful way of obtaining credit borrowers ought to be aware of the risks associated with unsecured loans before entering into them.
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