Get the flexibility to purchase products or services that might otherwise be beyond your reach with an unsecured loan. If you wish to pay for a choice medical procedure, educational expenses, a home upgrade or an extended holiday but you don't have enough cash stored away to cover these costs, personal unsecured loans may allow you to fulfill these goals. With unsecured loans, you don't have to guarantee payment with personal property, such as a house or an automobile. Rather, these loans are issued based on your credit rating and your financial history.
An unsecured debt is a serious legal commitment, which must be honoured according to the terms of your contract. Because these loans are unsecured, interest is generally higher than rates for a loan that's secured by collateral. However, if you don't own a house or other expensive property or you don't wish to risk using your home or car as collateral, an unsecured arrangement will give you the freedom to borrow the money you need to pursue your objectives.
Terms and Rates
Personal loans are available from banks or building societies in amounts as low as 500 pounds or as high as 20,000 pounds or more, depending on your needs, your financial history and your credit score. When you begin your search for unsecured loans, determine how much you'll need to borrow to make your purchase or carry out your project. Because interest may be higher than average, it's advisable to borrow only what you need to cover a specific expense.
Before you select a lender, it's well worth your time and effort to shop around for loans with the most competitive interest rates. Rates vary from one financial institution to another, and you aren't restricted to borrowing money from the bank where you hold a current or savings account. Look for reliable building society or bank that offers the terms you need at rates you can afford.
Interest rates for unsecured arrangements are generally fixed for the duration of these loans. Monthly repayments are also fixed at a specific amount, so that you know exactly how much you'll need to set aside every month. Banks will typically arrange repayment periods of 1 to 5 years, depending on your needs. The longer the repayment period, the more interest you'll pay over time and the higher the overall cost of your unsecured loan will be.
For borrowers with poor credit, high street banks are more cautious about issuing unsecured loans. Unfortunately, there are plenty of unscrupulous, lenders who are more than willing to offer unsecured deals at an outrageously high rate. Trustworthy lenders are licensed by the Office of Fair Trading, or OFT, a government agency that regulates lenders and other financial services providers. If you're turned down by conventional banks, seek assistance only from reputable, licensed financial institutions that specialise in adverse credit arrangements.
The Application Process
Applying for unsecured loans is quite easy; you may complete an application at banks, building societies or over the internet. In addition to your personal details, you will be asked to name the amount you wish to borrow. When a lender considers your application, your credit score and your ability to pay will be taken into account. You may be asked to provide proof of your monthly earnings in order to verify that you can afford to pay back the money you've borrowed at the proposed rate.
Financial institutions use your credit score to gauge the level of risk they will assume by lending you money. If you have a high credit score, you may qualify for larger unsecured loans at a lower rate. If your credit score is average or less than average and you are turned down by one bank, don't give up on applying for loans elsewhere. Financial institutions utilise different methods for calculating risk, and another institution may be willing to offer you a deal. Bear in mind, however, that each time you are turned down, a note is made in your credit report.
Unsecured loans are legal contracts between an institution and a borrower. Although your debt is not secured against your personal property, you may face legal action or bankruptcy if you are unable to keep up repayments. If you are borrowing a large sum, consider insuring the debt with a form of payment protection insurance. Many lenders offer this protection for a specific loan, or you may insure the debt through a more comprehensive income protection policy.
To take advantage of the flexibility of unsecured loans, compare offers from a number of reliable lenders. You'll improve your chances of getting a competitive rate if you shop around before accepting a deal. The house extension, wedding or holiday that you've dreamed of may be within your reach with an affordable personal loan.
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