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By Aldrich Chappel
Imagine, falling into an emergency situation
with an empty bank account. Does it raise your blood pressure?
Doesn’t your happiness vanish? Indeed, it does. The matter
aggravates when you have no one to bank upon, no property or asset
to offer as collateral or you don’t want to put your beautiful
home at risk, to get those much needed funds. Unsecured loans
are the perfect instruments to rescue you from such a situation. The greatness of unsecured loans is that they
are designed for borrowers who do not have anything to offer as
collateral. The lender who provides the unsecured loan has no
claim to the property or assets of debtor, should they fail to
repay the loan on time. Unsecured loans are given on the creditworthiness
of the borrower.
There are many people in UK who have CCJs against
them and are plagued by debt issues. The lenders, who thrive on
interest they get on their loans, consider lending to such people
a risky proposition. In order to counter the risk involved in
such a loan the interest they charge on unsecured loans is often
higher than the secured loans.
Since, there is no collateral, which the lender
can possess and sell to recover his money in case of default,
he wants to ensure the creditworthiness of the borrower before
giving any loan. Unsecured loans, due to this reason are given
after a thorough check of the borrower’s credit history
and financial condition.
Unsecured loans are a risky business, the lenders
are wary of giving large sums as loan. So, the amounts given are
smaller. Usually, with an unsecured loan one can get anything
between £500 and £ 25000.
The repayment schedule of the unsecured loan
is designed so as to increase the profit and minimise the risk
for the lender. Most lenders will give you the option to repay
the loan between time periods of six months to ten years. The
longer the tenure of the loan the greater is the interest you
pay on it. It is in the interest of the borrower to decide on
a monthly installment that doesn’t pinch him and makes the
repayment period as shorter as possible. This is often a tricky
situation but with consistent financial discipline the borrower
can salvage the situation.
There are many advantages of getting an unsecured
loan. The application given for any unsecured loans is approved
faster than those for secured loans. The simple reason being,
that there is no property valuation to be done since no collateral
is offered. The fees associated with property valuation is also
absent in the case of unsecured loans. Unsecured loans are available
to borrowers having CCJ’s or adverse credit ratings, but
a good credit record helps in getting a better deal.
Unsecured loans can be used for a variety
of purposes some of which are enumerated below:
• It can be used to fund that dream cruise or beach holiday.
• It can be used to get funds to carry out home improvements.
• It can be used to pay off existing debt, or consolidate
multiple debts into one and ease the repayment problem.
• It can be used to cover arrears in mortgage repayments
and to make it more manageable over a longer repayment period.
A borrower can get an unsecured loan at a rate
different from the rate advertised by the lender. Depending on
your creditworthiness and the amount you want to borrow, he might
charge you a higher interest rate or provide loan at a lower interest
than the one advertised. As is true with all other loans, unsecured loan
must also be repaid on time. Non- payment of the installments
or default might attract legal action from the lender to recover
his amount. If he is forced to take such a drastic step it will
reflect badly on the creditworthiness of the borrower.
Summary
Unsecured loans, as the name suggests do not require any collateral.
They are given solely by judging the creditworthiness of the individual.
Unsecured loans are approved fast, but are given for small amounts
and usually carry higher interest rates to offset the risk involved.
These loans are boon for people with negative credit ratings or
those who don’t have anything to offer as collateral.
Aldrich Chappel holds a master degree in finance and associated with Get Secured Loans, since its inception. To Find Secured loans visit http://www.get-secured-loans.co.UK
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