Everyone talks about the advantages of unsecured loans over other forms of financing that are more expensive. There are of course, even more inexpensive sources of funds like home equity loans but they are not considered consumer lending. So, why aren't unsecured loans the stars of consumer lending if they have so many benefits and advantages over credit cards?
Probably, as usual, there are many reasons for this to happen. Maybe, unsecured loans are not that advantageous as many lenders and financial and credit agents claim. But also, there is a great deal of marketing going around and unsecured loans seem not to be receiving much attention; at least not as compared to the attention that marketing departments pay for credit card products.
Lack Of Flexibility
As opposed to other forms of financing, personal unsecured loans do not provide much flexibility. You apply for a fixed amount and then you have fixed or slightly variable loan installments every month and a repayment program that lasts a fixed period of time too. Thus, there is not much maneuvering possible if you happen to need more money or to pay less some month.
Though credit cards may be more expensive they provide many benefits compared to unsecured loans: you have a credit limit but no fixed amount, you have minimum payments but besides that you can pay whatever figure you want and you can finance the balance for as many months as you want (though it is not advisable). The question is whether all these factors are always advantageous or not.
The Power Of Marketing
Since credit cards and other more expensive financial products produce higher returns for the banks and lending institutions, the main amounts that are spent on marketing and publicity are destined to promote these products, leaving personal unsecured loans somewhat relegated to a second or third position.
Everyday, you see hundreds of advertisements everywhere in paper, radio, internet, television, on the streets, etc. about credit cards and store cards. Yet, when it comes to unsecured personal loans, there is not much publicity made. You may find at most some brochures at the banks and some advertising material through mail sent by banks and financial institutions to their clients while with credit cards everyone is desperate to attract new clients as well as offering new products to existing clients.
Thus, even when personal unsecured loans provide a cheaper source of funds, marketing and publicity don't concentrate their efforts on them and thus hold them back from being the stars on the consumer lending market. That's why only those that analyze their options thoroughly use personal unsecured loans as a form of financing seizing their many benefits.
Personal Unsecured Lines Of Credit
An excellent alternative are personal unsecured lines of credit. They provide all the benefits of personal unsecured loans and also the flexibility that credit cards offer. You are assigned a credit limit just like with credit cards and you can withdraw any amount up to that limit as many times as you need. There are only minimum payments but you can repay as much as you like. The interest rate charged is only slightly higher than that of unsecured personal loans and significantly lower than those of credit cards and store cards.
