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Unsecured short term loan is more common than secu...

Description

Solution


Question

Unsecured short term loan is more common than secured short term loan due to the following reasons: ? Unsecured loans are easily available as any person has surplus funds, can lend many on an unsecured basis to a person seeking a loan ? Unsecured loans gets processed very fast due to lesser amount of formalities and also the paper work involved in unsecured loan transactions is minimal ? Unsecured loans can be taken for any period and lot of flexibility is available in fixing the time period of loan ? The installments or loan repayment in case of unsecured loan can be determined based on the understanding of the lender and borrower, thus making it suitable for the borrowers ? As the paper work in case of unsecured loans is less, there is no tax issues and accountability for the end use of the money loaned ? The unsecured loan market is customized based on prevalent customs and practices thus making it more attractive than the secured loan market ? No collateral is required to take a unsecured loan as compared to secured loan where the value of collateral is generally higher than the loan amount Another way to look at this situation is the duration of the loan and its impact on the risk of the loan to both parties. Can you comment on this issue ?,nO WORD LIMIT

 

Paper#3969 | Written in 18-Jul-2015

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