USL – Loan Product Acronym Description
The acronym USL stands for our financial product term, Unsecured Signature Loan – an unsecured signature loan is one whereby the borrower/applicant isn’t required to provide security in the form of tangible collateral, such as home equity, a vehicle, or an item of value in excess of the applied for loan.
The term Signature Loan is used because the borrower only needs to SIGN promissory documents and/or lending agreements. An unsecured signature loan almost always involves the borrower(s) being charged higher interest rates than they would pay if they were providing collateral for the loan. On some occasions, signature loan products are used by predatory lenders working illegally, or the very least, unethically.
There are many reasons why consumers prefer to apply for unsecured loans vs. secured loans. The obvious one is that they do not need to provide collateral. They may not have collateral to place against a loan or they may feel that the cost of the loan, even with higher interest rate is not significant since they are planning to repay the loan in a relatively short time frame.
While providing collateral tends to reduce the interest rate due to a perceived lower risk, if you planning to repay the loan in less than a year’s time, the amount of money you save will not be significant unless you have a really large loan.
Another reason people prefer unsecured loans is that typically there are no extra fees involved when you apply for and receive an unsecured loan. Secured loans must be registered as a lien against the collateral you are providing and this often involves legal fees and processing fees to register the loan when it is approved. In addition when you repay the loan, the loan must be deregistered from the collateral which involves more fees.
Many borrowers who are considering a personal loan will compare the additional interest they might pay with an unsecured signature loan vs. the legal fees, the processing fees and lower interest rate they would pay for a secured loan and make a decision based on which one will save them more money.
Anytime an item is going to be used for collateral it must be appraised to make sure that the value is sufficient to cover the loan. This takes time and there is also a cost for doing this as well. Many people do not want to wait for this process to be completed, since they are in more of a hurry to receive the loan and use it for whatever they are planning.
If you have a credit card payment due for example and are planning to apply for a loan that is a lower interest rate than your credit card, you probably need the money quickly. Consumers do not want to wait while collateral is being appraised and the loan registered as a lien.
Unsecured loans are probably the most flexible debt instrument available next to using a credit card. Many consumers use their credit cards as debt instruments and pay a high price for this flexibility. The interest rate charged on credit cards is much higher than the interest rate charged for unsecured loans. Consumers can save themselves a great deal of money when they use an unsecured loan to consolidate their debts from credit cards and other types of debt.
Unsecured loans can be discharged at any time. Consumers have the choice of just paying the monthly payments until the loan is fully paid or if they come into some money that they were not aware of they can repay the unsecured loan at any time. Many people use unsecured loans for this purpose and are able to manage their money accordingly.