Are you going through a hard time? You know you need money, but you don't know how to get it. Every lender seems to want security, but you don't have anything to offer? Read on, because Unsecured Loans are exactly what you need!
As the name suggests, an Unsecured Loan is not backed by anything. In other words, the collateral that is needed for a Secured Loan is not needed for an Unsecured Loan. Unsecured Loans are given out based on your credit history and how likely you are to pay back the loan. These loans are harder to get because they are risky for the lender. The lack of collateral is the most obvious reason for this. If a borrower doesn't pay back his loan, the lender has nothing to count on. To make up for this, unsecured loans have higher interest rates and less money that can be borrowed. The most that you can borrow with an unsecured loan is GBP25,000. A typical APR for a loan with no collateral is between 7% and 30%. Secured Loans are more popular than Unsecured Loans, but Unsecured Loans have their own set of benefits.
Pros of loans without collateral:
- Unsecured Loans do not require collateral. So, if you don't own any land or a house, this loan is the best way to get money. So, Unsecured Loans are great for people who don't own a home, rent, or both.
Since there is no need to put up collateral for unsecured loans, the equity in your home can be used for other things if you own a home.
- People who own their own home don't want to use it as collateral, so they prefer unsecured loans.
Unsecured loans are easier to get because there is no time spent figuring out how much the collateral is worth. This is perfect for people who want to get a loan faster than usual.
- A loan with no collateral can take anywhere from 6 months to 10 years to pay back. Most of the time, the time it takes to pay off an unsecured loan is shorter than the time it takes to pay off a secured loan (the shortest term for a secured loan is five years).
- People who get help with their income, like those over 60 or who don't make enough to cover their basic needs, can also get unsecured loans. This includes people with savings between GBP8000 and GBP12000.
- The interest rate on an unsecured loan can be anywhere from 7% to 30%. This can't change over the course of the loan. It's much easier to pay back a loan when you know how much you have to set aside each month than when you don't.
- If a lender of unsecured loans finds a borrower with a good credit history and a reliable way to pay back the loan, he won't think twice about giving the borrower a better interest rate.
Unsecured loans can be used for many things, like home improvements, consolidating debt, paying off mortgage arrears, buying a new car, or going on a luxury vacation.
Unsecured Loans are becoming more popular than many other types of loans. People are more careful about putting their homes in danger now. Even if you can't pay back the loan, you won't lose your home. However, if the borrower doesn't pay back the loan, the lender will use the terms of the legally binding credit agreement and go after the borrower through the courts. Borrowers aren't afraid to ask for Unsecured Loans, so more and more lenders are popping up, each with better payment options than the last. Before you choose one, you should look at your options and learn about the terms of Unsecured Loans. Even though there are many benefits, the choice is ultimately yours.
