Cash Loan Crisis - Unsecured Personal Loan

Unsecured Personal Loan - A Definition

Cash advances, payday loans - they're all just different ways of describing the same financial tool. An unsecured personal loan is a loan you take out without putting any collateral on the table other than your promise to repay the debt. The consequences of applying for an unsecured personal loan include:

higher risk of credit damage
greater fees and penalties
no promise that you will repay the debt or rid yourself of the responsibility anytime soon.

Taking your financial assistance in an unsecured fashion is always a risk - especially when the pseudo-security you are putting down is your own income.

Is a payday loan really an unsecured personal loan?

We'll say it again - and unsecured personal loan is any financial aid you take out that does not require any solid collateral. But! When you apply for a payday advance - the most infamous kind of unsecured personal loan - you are putting something up for collateral, right? What about that paycheck? Well, yes and no. You can only qualify for these loans if you do indeed receive a steady paycheck, but the lender has no guarantee that you will use that paycheck to actually repay thee debt. The roll-over is a touchy tool for both sides of the equation: borrowers face the steep fines and fees, while lenders run the risk of a state of constant roll-over and never get repaid their original balance.

Who is taking on greater risk?

So a payday loan is kind of an unsecured personal loan, the level of security being in doubt. But by far the party facing the greater risk is the borrower - never feel bad for the lender. Most lenders charge $30 per $100 in every unsecured personal loan they dish out - if you roll over your debt just four times (two months worth) they will make back their original loan amount plus 20% interest. But they'll still keep charging until you hold up your end of the agreement and repay the entire balance of your original unsecured personal loan, all interest aside.