Types of Unsecured Loans

There are several types of unsecured loans. You can find below a selection of the most widely used ones.

Overdraft

The overdraft is a line of credit that bank attaches to a debit card. Thus, the holder has access to a loan that is permanently renewed, subject to a limit set by the bank. To qualify for this unsecured loans, you need the consent of the employer. It must have a protocol with the bank and remit salaries debit cards. The credit limit is reached when the money is spent. After that, the cardholder enters the credit line and pays interest for the amounts used.

Credit cards

Credit cards are a type of unsecured loans granted by the bank, but not subject to the employer paying the salary to that specific bank. In this case, however, the fees and interest rates are much higher than in a regular bank loan. The main advantage is that you can buy now and pay later. It is ideal to pay to reimburse the amounts drawn from the credit line within the grace period (up to 60 days normally), during which the bank does not charge any interest on the money used. Another advantage is that you benefit from a loyalty scheme offering discounts at certain merchants or cash bonuses or points, which increase the value of purchases.

Home loan

Home loan is the unsecured loans generally granted for small amounts and for short periods. The credit is handed at the customers’ homes, and the instalments are also paid at home, directly to the creditor representatives.

Loans for personal needs

Loans personal loans can be a solution if you need some larger amounts (maturity can be pushed in this case even over 5 years). The costs vary by lenders. Once you have decided on the formula of the loan, the bank will ask you to fill out a credit application. Your responses are very important in this application. They will be centralized and analyzed and based on that you will receive a so-called credit score.

The interest will be calculated monthly and will be found in the monthly rate that you pay. The interest rate varies depending on the type of loan. The amount of the annual percentage rate (APR) may be an important factor in choosing the best loan. With it, you will be able to get an idea of the real cost of a loan. APR takes into account not only the interest rate costs displayed but also other taxes, fees, and some insurance to be paid by the customer.