In recent years, a number of companies have developed online platforms in a variety of forms, including direct lending platforms for small businesses and marketplaces to provide borrowers with quick loans without collateral in Nigeria.
Online loans are processed as fast as 60 seconds for some applications and disbursed faster than traditional loans. This compares favorably against the average of about 25 hours that small businesses spend on filling out paperwork at an average of six traditional lenders before securing some form of credit.
Upon filling out an online application, owners can be approved in hours and have the money in their account in just days, while traditional lenders can take anywhere from a few days to a few weeks to make their decision.
While the defining characteristic of secured loans is that you’re required to offer up assets as collateral, unsecured loans have no such requirement. If you don’t have any assets to offer, you can consider looking at taking out an unsecured loan. To even qualify for this kind of loan, you’ll probably likely need to provide the lender with proof of income to show that you’re capable of making repayments on your loans. While unsecured loans these are a great option for borrowers without assets, they unsecured loans aren’t the best option for everyone.
Lenders on average charge higher fees and interest rates than their secured loan counterparts. These loans also are known for their high fees for late payments. Lenders can go on to take legal action if you end up defaulting on the loan.
Unsecured loans can be divided further into two categories: open end and closed.
Open-end unsecured loans
Open-end loans, sometimes known as revolving credit, are loans you use over and over with an agreed upon credit limit. Provided you don’t go beyond your credit limit and make the minimum payments, you’re in the clear. It’s worth noting that open-end loans create an environment that makes accumulating debt frighteningly easy. Paying only the minimum monthly payments means you can rack up huge interest payments over time.
Closed-end unsecured loans
On the other end of the spectrum we have closed-end loans, also known as nonrevolving credit. Closed-end loans provide you with a lump sum of money that must be repaid by a certain date, along with interest and fees. Student loans fall into this category. While closed-end loans don’t provide the flexibility of open-end loans, they do have the distinct advantage of providing borrowers with a fixed payment schedule that limits the interest borrowers end up paying over the life of the loan.