The Cost of Instant Unsecured Personal Loans

In times of financial emergencies, you can always take out instant unsecured personal loans that are available from various banks and lending companies. You can apply for these loans, even with a bad credit score. Before you fill out any application, you need to consider the costs that are commonly associated with this type of loan. Below you will find the risks and the drawbacks that normally come with fast unsecured personal loans.

High Interest Rate

An important aspect of personal loans are high interest rates. Unsecured personal loans are considered as high risk loans and thus lenders impose higher rates to consumers. Many lenders charge as much as 30% interest on these types of loans. For example, if you borrow $500, you will be required to pay $650 after two weeks.

Shorter Payment Terms

Instant unsecured personal loans usually have shorter payment periods because they are not insured with collateral. So, there is a higher tendency for borrowers to default on unsecured loans. Thus, lenders shorten the payment terms to get their investment back as soon as possible. A borrower is lucky enough if they can find a lending company that offers fast unsecured loans with payment terms of up to four months. Typically, the due date for an instant personal loan will not go beyond 91 days after the loan is approved.

Steep Penalties for Late Payment

Borrowers who are not able to pay their instant unsecured personal loans on time can expect very high penalties on the next demand letter they will receive from the lender. Some lenders will charge anywhere from 50% to 100% of your total loan if you default for more than 30 days. Again, the reason for the steep penalty fees is to prevent defaults and late payments from borrowers. To avoid paying exorbitant default charges, make it a point to pay your unsecured loans on time.

Huge Fees for Term Extensions

When it comes to loans, it is always more advantageous if you ask for a loan extension rather than default on your debt. A payment term extension normally does not have any effect on your credit rating. But if you choose to simply dodge payment of your loan, your personal credit score will definitely suffer. Still, if your lender agrees to extend your payment term by a few days or weeks, you should be prepared to pay additional interests plus other loan extension fees.

When used properly, instant unsecured personal loans can help you get much needed cash when you find yourself in a tight spot. For many borrowers, instant personal loans are a lifesaver. If used improperly, this type of loan can turn into a big burden. Make it a point to plan where to use the proceeds, even before you apply for a fast personal loan.

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