Unsecured
Loans
Unlike a secured loan, an unsecured loan does not
require you
to have
property to
use as
collateral
for the
loan. This
type of loan
is not
secured
against your
assets, it
is therefore
more of a
risk for the
lending
institution
and more
stringent
criteria are
used to
assess
applications.
It is
important
that the
lender can
see evidence
of a good
credit
history and
earnings
sufficient
to meet
regular loan
repayments.
Lenders
include high
street banks
and building
societies
but you may
find that
specialist
lenders are
able to
offer a loan
to you where
the high
street
branches are
unable to
due to their
less
restrictive
criteria or
through
their
specialism
in a
particular
type of
borrower,
e.g. the
self
employed,
company
directors,
tenants,
students or
people with
mortgage
arrears, an
adverse
credit
history and
County Court
Judgements (CCJ's).
Without
onerous
requirements
for
arranging
security an
unsecured
loan is
relatively
quick to
arrange and
funds can be
made
available
often within
24 or 48
hours of
being
accepted by
the lender.
The terms of
the loan
will reflect
the risk
profile of
unsecured
loans
however and
characteristically
will allow
lesser
amounts to
be borrowed
and a higher
rate of
interest. An
unsecured
loan will
usually have
a fixed term
and a fixed
interest
rate and is
generally
repaid
monthly.
Some lenders
allow
payment
holidays and
some will
allow
penalty free
early
repayment.
Remember to
shop around
for the best
unsecured
loan deal.
An unsecured
loan is
therefore
suitable for
those
looking to
borrow up to
around
£15,000 and
who have a
good credit
history and
obvious
ability to
make
repayments.
As the size
of the loan
is generally
smaller than
that of a
secured loan
the term of
the loan
will often
be shorter,
usually up
to 5 or 10
years.
While
security
over your
home is not
required
lenders
often prefer
homeowners
to other
borrowers.
It may seem
that an
unsecured
loan is less
risky to the
borrower as
the loan is
not secured
against
their house.
In reality
you should,
as with any
loan, be
vigilant to
meet your
payment
obligations
because
court
proceedings
used to
recover
outstanding
balances
will
inevitably
take your
assets into
account.
An unsecured
loan can be
used for a
variety of
purposes
including
for example
buying a
car, going
on a
holiday,
home
improvements
or debt
management
and
consolidation.
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