Unsecured Loan Guide

Unsecured Loans

An unsecured loan, which is also known as an unsecured personal loan, can be used for a variety of purposes including debt consolidation and management, buying a car, a holiday, home improvements etc.

This type of loan differs from a secured loan in that it does not require security in the form of property as collateral for the loan.

Consequently this type of loan is perceived as more of a risk by the Lenders as it is not secured against your assets. Tighter criteria for applicants are the result of this lack of security. Evidence of a good credit history and sufficient income to meet the re-payments is also very important.

Lenders
At a basic level you can divide Lenders in to two types, mainstream and specialist; the mainstream Lenders consist of Banks or Building Societies who tend to have a very strict criteria and possibly higher rates to matchand the specialist Lenders who focus on a particular type of loan or a range of loans for particular criteriawhich generally meansbroader and less rigid qualifying requirements.

For example specialist Lenders may deal with applicants with anything from adverse credit, CCJ’s or mortgage arrears to the self-employed, tenants or students.

Without the time consuming arranging of security an unsecured loan is quiet quick to organise and the funds can be made available to you within 24 or 48 hours of being approved by the Lender.

However the loan terms will mirror the risk involved for the Lender and this typically results in a lower amount loan and a higher rate of interest.

Rates, Terms And Amounts
Unsecured loans are generally provided with a fixed term and a fixed rate of interest and they are repaid monthly. However there is some flexibility here and some Lenders will allow a payment holiday and penalty free repayments. A broker is the best option when it comes to finding these deals.

A £50,000 loan can be obtained quiet easily by those with a good credit history and the ability to make the repayments. However if you have abad credit history it no longer presents a barrier to obtaining a loan. Competition in the loan industry has seen Lenders broaden their criteria in order to be able to accept a wider range of applicants.

With an unsecured loan amount generally being lower it follows that the repayment term is also shorter, often only 5 to 10 years.

Conclusion
As already mentioned security over your home is not a necessity but you should keep in mind that Lenders in general would prefer some kind of security. It may seem that an unsecured loan is less of a risk for the borrower. In fact, as with any loan, you should be careful to meet your repayment commitments. Should iyou miss a number of payments your Lender will be well within their rights to take your assets in to account to reclaim the value of the loan.

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