Unsecured Loans can be defined as Personal Loans that provide
resources (loans) to borrowers, without them having to offer
their homes, property or anything as security. In case if you
are a tenant and do not have anything to offer as collateral
to a lender- Unsecured Loans are for you! Remember that these
are given after a check on the credit history, the character
and repayment capacity of the borrower. Majority of people who
otherwise have a home, but do not want to risk it as the collateral
also find unsecured loans very useful.
The factor of risk for lenders is far greater when they give Unsecured Loans. The straightforward reason - the lack of collateral. In other word lenders do not have anything to bank on, in case a borrower defaults in his repayments. To compensate for the inherent risks, unsecured loans come with a higher rate of interest as well as a lower loanable amount. As a matter of fact the lenders tend to limit the value of unsecured loans to ?25,000. The normal APR?s of an unsecured loan can range from 7% to 30%. With good credit record and dependable repayment capacity the lender will not hesitate in providing him with a better interest rate.
Another attraction of Unsecured Loans is that their approval is very fast. Since, no collateral is needed in unsecured loans, the step involving valuation of the asset is eliminated. As there is comparatively less paperwork as well, the pace of approval is accelerated. Therefore, valuable time and invaluable money are saved on this front!
Before granting an unsecured loan, it is pretty much obvious that the lender
has to verify the credit history of the borrower. Many people
are of the view that they can't get a loan if they have bad
credit or a past bankruptcy. Unsecured loans are readily available
to those who live as tenants in addition to those having adverse
credit history. In such scenario, unsecured loans offered in
this category are very optimal due to absence of guarantee.
Though, to those with bad credit history, the Unsecured Bad Credit Loan is a good option. Because you have bad credit, it is quite important that you know your credit score. A credit score above 720 is termed as a good credit score while that below 600 is a bad credit score. On the other hand for an unsecured borrower, knowing your credit score gives you power to get correct rates.
Main features of an Unsecured Loan:
• No collateral is needed to be placed against the loan taken. That?s why, homeowners as well as non-homeowners can apply for it.
• Not as much paperwork and hence faster to obtain.
• The repayment term for an unsecured loan begins from 6 months and can go up to 10 years.
• The interest rates given on unsecured loans are higher, normally between 7% and 30%.
• In theory the maximum loan amount for unsecured loan is to about ?25,000.
Although, there is no worry of losing your home in case of any inability to repay the loan, in the case that a borrower does not pay up, the lender will pursue the borrower through the legal system. According to experts tenants and other homeless people constitute a major group of borrowers of unsecured loans in the UK. What?s more Unsecured loans are also made available to people who are on income supports: like those over 60 years of age, unemployed or people whose savings range from ?8000 to ?12000.
Important points to take into account before applying
for a loan:
• Unsecured loans are more costly as compared to the secured loans.
• The routines that are available for repayment of unsecured loans are similar to secured loans. It is of utmost importance that you do the calculations. Furthermore remember that the amount to be repaid will include the actual loan amount, interest for the period, and any other fees charged by the borrower.
• Interest rates chargeable on unsecured loans are pretty much defined by principal banks and financial institutions. And that is where loan providers who are charging more than this rate without any justifiable reason are only overcharging borrowers.
• Before making any decision, the borrower should consider his financial position, the amount he wants to borrow and the repayment option he will be able to afford. Based on these needs he should look for the lender who provides the best possible offer.
• Unsecured loans are given by traditional financial institutions like building societies and banks, but recently, also by the larger supermarkets chains. Therefore chose wisely!!
The UK can be termed as a nation of debtors. According to one estimate 15 million people in the UK are struggling with personal debt, while last year some 46,000 people filed for bankruptcy with personal debts running at an average of more than ?50,000. Despite these figures however, they continue to borrow on loans and finance agreements, mainly because it is still very cheap to do so.
Competitive personal loans rates:
With the Internet making personal loans more accessible it is now simpler than ever to apply for a personal loan. Just a quick glance online depicts that adverts for personal loans are everywhere. In fact, the competition between lenders is so neck in neck that many personal loans now come with added benefits such as discounted interest rates, air miles and even free insurance products to entice customers to choose a particular loan.
Apart from that loans companies too are relaxing their lending criteria, opening up personal loans to people who they may not have been willing to consider some five or ten years ago. Adding to the incentives for the borrower to apply for loans is the point that the base interest rate has maintained a relatively steady course over the past few years, and looks set not to increase dramatically over the next year or so either. All in all, this combination of parameters has fueled the personal loans market, pushing the nation's total debt past the ?1 trillion mark for the first time in history.
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