Unsecured Loans are a form of financial assistant that can be obtained without being secured by any form of collateral.
For this reason, they are a very popular form of financial assistance. This type of loan is perfect for individuals who do not own their own property as well as for tenants, students and even homeowners who don’t wish to risk their own property.
To qualify for this type of loan, credit checks are made by the financial services to ensure that you are a ‘trustworthy’ investment to the lender. The risk involved to the lender in providing this type of loan is neutralised by significantly increasing the interest rates; it is rare to find a ‘low interest’ unsecured loan. Unsecured Loans are very much a ‘last resort’ option and great 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’, ‘Pay-Day 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.
Loans that aren’t secured against property are ideal for those looking for a quick way to obtain capital as payments are usually made on the same day of application. These loans are ideal for those wanting a small loan with a short repayment term. Although, higher loans (over £10,000 for example) can usually be arranged that also have longer repayment terms. With an unsecured loan, the maximum lending amount is typically £25,000 from most UK Lenders. Lenders determine an unsecured loan agreement depending upon the borrower’s personal circumstance and therefore payment breaks can be arranged and repayment terms can be designed around the borrower’s financial need.
As mentioned above, a loan of this type is determined by the consumer’s credit history, which is not so great news for people with bad credit. However, the recent advent of ‘Guarantor Loans’ has made getting an Loan much easier if you have bad credit. Guarantor Loans are a type of unsecured loan which require you to have someone (a family member/friend) to take care of the debt, someone who can help you out if you have trouble paying by taking responsibility of the debt; they guarantee the loan. This type of loan is also ideal for young people and students and it’s rapidly becoming one of the most popular finance 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 ideal for people with bad credit as they are determined solely upon the credit history of the Guarantor, so it is vital to discuss all the relevant details with your chosen Guarantor.
Obtaining this type of loan is still extremely difficult however, especially given the current economic climate, as discussed above, lenders have only recently re-entered the market and are much more wary of who they lend to. Nonetheless, most Lenders can be found online, for example, online Guarantor Loans usually provide loans of around £3000. Although, the increased absence of lenders in the market means it’s all the more important to research all the options available for your circumstances. Lenders recommended by a financial advisor are likely to be much more reliable than some of those found online.
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 1%. This is surprising with the current base interest rate being at its lowest ever level at 0.5%.
Over one million consumers are said to have opted for an Unsecured Loan last year in a bid to consolidate their outstanding debts. If Personal Loan Interest rates rise any further though, the country could hit further economic turmoil as unsecured loans may become too expensive for the majority of the country. Therefore, it is imperative that you seek professional advice when looking for the right unsecured loan for your circumstances. To be accepted for a most Unsecured Loans you must be a full citizen within the UK and you must be over 18.