There is a variety of unsecured loans, and a common type is a loan from a friend or a family member. It is important to take such loans seriously, whether you are the lender or borrower. If a large amount of money remains unpaid, this may be detrimental to relationships with friends and family. Another type of unsecured debt is making purchases on a credit card. Every time cardholders use a credit card, they sign a form authorizing the payment. The form is actually an agreement to repay the sum borrowed. The terms and conditions and the size of the loan are agreed before signing the cardholder agreement.. Cardholders are not required to pledge some asset as collateral, such as a car or real estate. If the loan is not paid on time, the credit card company may assess additional fees, start legal proceedings, or send the account to collections. If the borrower experiences significant reduction of income and is unable to repay the loan, he may claim bankruptcy in order to stop collection. Most of the time, credit card companies cannot demand that persons who have been made bankrupt sell any assets they own. Claiming bankruptcy, however, is a very serious step and can damage the borrower?s credit rating. Moreover, financial establishments consider such borrowers high risk and are less likely to approve their loan applications. Commercial paper is another unsecured loan to consider. It is a short-term, unsecured debt instrument used to finance inventories and accounts receivable and to meet short-term liabilities. Commercial paper is typically issued by corporations and large banks to meet their short-term obligations. Given that collateral is not required, only businesses with excellent and very good credit get a good price when
Types From Unsecured Finance To Bear In Mind Overview
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