Thus the claim that the loan can be used for any purpose is actually no benefit at all. On the hand, the no collateral benefit is a real tangible benefit to the borrower, though a risk on the part of the lender. In case the borrower for one reason or another is unable to honor the loan's terms and conditions, chance of repossession of their valued assets does not arise. This is very true, but the borrower should not dishonor their loan's repayment terms as the lender can still take a legal action to recover their investments irrespective of it being unsecured. Normally the collateral is only a warranty and gives the lender chances of recovering their investments if everything else fails. However, unsecured loans do not require the applicant to pledge any asset as security in order to procure them. These loans are for such people as students, tenants, self-employed, non-homeowners and all those others that are that are living with their parents.
The risks associated with unsecured loans for the lenders is relatively higher, hence their comparatively higher APRs. However, these loans are very safe for the borrowers and are an easier option as long as their credit rating and repayment capabilities can be proved to be okay by the lenders. The loans are swiftly processed once everything adds up. Analyzed below are some examples of unsecured loans available in the financial market.
1. Unsecured home improvement loans: These type of loans are very ideal for those people who want to improve their dilapidated homes, for instance for renovating the kitchen, for designing the garden, landscaping, home expansion and so forth and do not require any form of a security pledging in order to avail them.
2. Unsecured debt consolidation loans: This type of unsecured loan is used to pay off the current running loans and coverts them into one single monthly payment. However they carry a higher rate of interest as compared to other unsecured loans.
3. Unsecured holiday loans: These are for those planning to go for holidays but don't have the required resources.
4. Unsecured business loans: These are for those borrowers who require funding their businesses, for example for starting a new business, or expanding an existing one. Typically, they are taken to assist purchase machinery, paying off suppliers and so forth.
All in all, apart from the above mentioned unsecured loan types, there can be others. Nevertheless, their greatest merit is that they can be availed without the need for collateral, thus giving the borrower a peace of mind since none of their properties is at risk.