An unsecured loan, as most of us know, is not secured against collateral and therefore it poses a great risk to the lender. He could lose his money if the borrower fails to repay his loan in time. The risk increases if the borrower has a bad credit history-a result of missed payments, arrears, defaults, bankruptcy and county court judgements (CCJs).
Since there is no collateral in the case of an unsecured loan, there is very little paperwork. Very little paperwork means that the loan will reach the consumer very fast. The consumer of an unsecured loan also faces little risk in case he is not able to repay the loan on time. The lender has absolutely nothing to seize and sell to get back his money. This risk makes the lender set strict terms and conditions for an unsecured loan. he charges higher rates of interest and reduces the repayment term considerably.
Uses: There is no end of the uses a consumer can put an unsecured loan to. An unsecured loan can help him
1. Meet his medical expenses
2. Repay his past debts
3. Finance the studies of his child
4. Give a face-lift to his house
5. Buy a vehicle, and
6. Consolidate all his past debts
Though it is difficult, an unsecured loan can be availed by people with bad credit record also. May sub-prime lenders in UK are willing to disburse loans to such people. The terms and conditions of a bad credit unsecured loan may be harsh, but they can be overlooked considering the difficulty in obtaining such a loan.
It is advisable that before applying for an unsecured loan one compares the rates offered by the online lenders UK. This helps save time and a lot of paper work.
The author is a finance expert and is currently working with Shakespeare Finance Ltd. |
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