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Many people will often look online for  loans. You should be aware of two types of loans when you are conducting your search. There are secured loans or asset-backed loans. Example of these loans include mortgages, auto loans, and on the sub prime side auto title loans. There is also unsecured loans. These loans are often referred to as personal loans.  Unsecured loans are loans granted in good faith that you will use them for a good reason and pay it back by the terms agreed upon.

Many unsecured loans can be attained through your local bank or credit union if you have good credit. However, if you have fair to bad credit you will most likely find that only payday lenders may offer you an unsecured loan. Because of your credit history, you are considered a subprime customer. So to adjust for the lender’s risk, payday loan lenders charge a higher interest rate or APR. The default rate for people who take out payday loans and never pay them back is 60%. So you may understand why it costs you on average $100 in interest and fees to take out a $500 payday loan.

Before accepting any unsecured loan make sure you understand all of the terms and conditions with your loan.