The Benefits of Unsecured Loans
Unsecured finance is generally known as low risk to the consumer as the funds can be obtained without securing any property against the loan. This type of loan is perfect for individuals who do not own their own property in addition to tenants, students and even homeowners who do not wish to risk their own property. This type of loan cannot be obtained without credit checks being made by the financial services to ensure that you are a trustworthy borrower.
Lenders neutralise the huge amount of risk involved in this form of lending by presenting loans which have much higher interest rates, shorter loan amounts/terms and less flexible options. Unsecured loans are very much a last resort but ideal if you need the money to fill in the gap of short fiscal need. They also often come under various guises including: personal loans, tenant loans, payday loans and car loans to name but a few. This is because unsecured loan payments can be used for almost anything, from unexpected healthcare expenses to paying for that dream holiday or ideal car.
Unsecured loans are ideal for those looking for a quick way to obtain capital as payments are usually made on the same day of application. They are designed to lend smaller amounts of money, usually below 10k, and therefore have much shorter repayment terms than most other forms of loan. With an unsecured loan the maximum lending amount is typically 2k from most UK lenders. Some unsecured loans can also be flexible, allowing you to pay less when necessary and more when you can. Others will incorporate the option to take a payment break, in the event of sudden illness for example.
As mentioned above, an unsecured loan is determined by the consumers credit history, which is not great news for people with bad credit. Although unsecured loans are available for those with a bad credit history through the recent introduction of a guarantor loan. A guarantor loan is a type of unsecured loan where a relative or friend of the borrower undertakes the responsibility of the loan; they guarantee that the money will be repaid even if the borrower hits financial difficulty.
This type of loan is also ideal for young people and students and it is rapidly becoming one of the most popular financial products in the market today. For most lenders, the guarantor has to be at least 21 years old, a homeowner and have a decent credit history. Guarantor loans are provided solely based upon the assessment of the guarantors credit history, no credit checks are made on the borrower themselves. Online lenders in this market usually provide loans of around 3000 pounds. Despite the many options available, obtaining an unsecured loan is still extremely difficult today.
As mentioned above, lenders are much more restrictive of who they lend to and how much they are willing to provide. Nonetheless, most lenders can be found online. The increased absence of lenders in the market though makes it all the more important to research all the options available for your personal circumstances. Finding a real lender is often as difficult as finding the best interest rates and deals.
Controversially, recent reports imply that banks in the UK are slyly trying to make more money from customers by increasing their personal loan interest rates. According to these claims, over the last 6 weeks, lenders have increased the average rate of interest charged on their personal loans by 1pc. This is surprising with the current base interest rate being at its lowest ever level at 0.5pc. Over one million consumers are said to have opted for an unsecured loan last year in a bid to consolidate their outstanding debts.
Although there are worries that if interest rates are to increase any further, unsecured loans are likely to reach an unaffordable level for many individuals in the UK. In order to qualify for an unsecured loan, the borrower must be a full UK citizen who is over the age of 18. With so many different factors to consider when contemplating obtaining an unsecured loan, it is of the upmost importance that you speak to a personal loan advisor in order to find the best deal for your personal circumstances.
About the Author:
This article was written by financial expert Bette McStafford. Bette works for http://www.JustUnsecuredLoans.com who specialise in finding loans for people with bad credit.
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