My Financial Broker is a credit broker and not a lender. Warning: Late repayments can cause you serious money problems. For help, go to https://www.moneyhelper.org.uk/
Loans fall into two categories – those that are secured and those that are unsecured. The simplest way to define an unsecured loan is one that does not require any form of collateral. Essentially, for the debtor to receive a loan, they don’t need to secure it against their property as collateral.
An unsecured loan is usually given solely on the credit worthiness of the debtor. Unsecured loans are also sometimes referred to as personal loans or short term loans. What’s notable about unsecured loans is that they can be acquired by anybody. Even those that do not own any kind of property.
If you need to borrow under £5,000 for a amount short time, then an unsecured loan could be the answer. These are short term loans with fixed rates of interest. A short term unsecured loan can be a payday loan, a P2P loan, or a personal loan. So what should you bear in mind if you are thinking about taking out an unsecured loan?
Unsecured loans will always attract a higher APR rate than a secured loan, especially if you have bad credit. However, while many unsecured loan lenders will assess your credit rating, there are also now a good number of lenders who do provide poor credit unsecured loans. If so, APR rates will be higher still, so it’s essential to shop around for the best deal.
Ideally, you should be looking to borrow only what you need for the shortest time possible. Otherwise, you are creating unnecessary debt, and racking up charges. Taking out an unsecured loan is a legal agreement, and gives you the ability to rebuild your credit record. It’s therefore important to repay on time, and make sure you can afford the loan in the first place.
For a payday loan or a short term loan, contact us for more information.
An unsecured loan is one which doesn’t need to have collateral to assure the payment of it. This is issued and supported only by the borrower’s creditworthiness. Those who are approved or qualified to get this loan usually have high credit score. That means their credit background should be satisfactory as it’s the only guarantee that the amount will be paid back.
Unlike secured loans, unsecured loans involve high risks for the lender as there’s no pledge of an asset. So, naturally the interest rate will be comparatively higher.
An unsecured loan can be the best option for those who don’t have any assets to use as collateral. Personal loans are typically lower amounts, and are used for small purchases such as equipment or furniture. The lender doesn’t demand any collateral but just relies on the borrower’s promise to pay it back.
If you are looking to take out an unsecured loan, there are different types available. We’ve listed some of the options below.
When you purchase equipment such as TV or refrigerator, the shop itself can offer you a loan. You’d be able to pay the amount in installments. There is, however, often a one off fee to start with.
Students can get loans from the government as well as universities. Even banks and other financers can offer education loans. Here the students do not have to pledge any asset. They get the loan on the guarantee of paying back when they get a job.
There are many other examples of unsecured loan, when you take one out for personal costs. For instance, you can get an unsecured loan for the purchase of vehicle, or for home renovations.
Credit cards also offer you money without any collateral. The rates on a credit cards can be especially good when you first sign up.
This is also an example of unsecured loan where individual investors, typically online, lend you money. To qualify for such a loan though, you’d need a good credit score.
As there is no collateral with an unsecured loan, there are a few limitations when taking one out. If you have poor credit rating, it is going to get tough to get approval from the lender for the unsecured loan. Alternatively, the lender may not offer the amount you need. They usually offer a smaller amount which might not be enough to fulfill the need of the borrower. It’s also important not to forget that in event of failure to repay the loan, your personal credit score could be affected.
Unsecured loans are often offered for a short duration, but the reality is that there are advantages of seeking an unsecured loan in comparison to other loans available in the market.
Although there are downsides, such as higher interest rates, unsecured loans have huge number of benefits. You need to consider both options carefully before taking out a loan.
With a secured loan, lenders can seize your collateral if you miss your repayments, or the terms and conditions of the loan are not met. But if the loan is unsecured, the lenders cannot take your property. Legal action can only be taken in certain circumstances too.
Unsecured loans are also readily available, which means you can get the loan within 24 hours of an application. With a secured loan, there are often a whole lot of formalities and costs.
Minimal documentation is also one of the major benefits of unsecured loans. It offers you flexibility and you don’t have to provide huge stacks of pages and personal documents to take out the loan. The whole process can be completed within no time, and you can have the money for your use.