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Tuesday, July 16, 2013

The Basics of Unsecured Small Business Loans

The process of obtaining unsecured business loans is much easier than getting other types of loans. This is primarily because this method (like paying by credit card) does not require collateral. Thus, many people who avail of these loans are those who are starting up small businesses. In this type of loan, the amount of money a person can borrow and the interest rates he will get depends on his credit score.

Unlike secured business loans, collateral which comes in the form of existing properties such as houses and cars are not tied to the agreement. This is a big relief to borrowers who are more worried about what could happen to their collateral if a default occurs before the loan is fully paid.

The risk-free nature of unsecured small business loans, however, is made possible because it has higher interest rates than secured loans. Without any assets to hold on to in case the borrower fails to completely pay up his loans, a lender's incentive for giving unsecured loans lies on the competitive interest rates.


As with secured loans, a borrower has to maintain a good credit standing to score an attractive unsecured deal with a lender. After all, every lender will be much more willing to shell out money for people who have a history of paying back in a timely and regular manner.

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