Why Chose An Unsecured Personal Loan?
A main influence for many people in choosing an unsecured loan, is the fact you don't have to put up any collateral. An unsecured loan does not use your property as security for the loan. The lender relies solely on your ability and obligation to pay. This means you don't have to worry about the lender having any rights over your property. It's also suitable for people who don't own their home, like renters , or council tenants, as no security is needed for the loan.
As the bank, or loan company does not have the security of your property as a means of ensuring the debt will be recovered, this makes this kind of loan a higher risk. To offset some of this risk the lenders will charge a higher interest rate than a loan where you have provided some security. The loan also has to be paid over a significantly shorter period than a secured loan.
The unsecured loan usually takes a little bit longer to arrange, because the lenders will take time to thoroughly check the details you have given them They will investigate your credit rating, your credit history, and you will need to have proof of income. All these things take time to check.
Unsecured loans are usually available from £1000 to £25000. The repayment period also varies from 1-5 years for smaller loans and 7-10 years for loans over £10,000.
The amount you borrow is subject to an interest charge, the interest rate applied to your loan is known as the APR. It is wise to compare the APR rates available if you as some of the APR's available even vary within the same company. Lenders may offer different rates depending on the way you apply for the loan- by telephone, or online etc. So it pays to shop around to find one suitable.
Although a low APR is important in choosing your loan, take time to read the agreement fully, as any additional costs will be found here. Some lenders for instance apply an early settlement charge. This means if you repay the loan before the agreed end date of the loan there may be a charge. Sometimes these charges can be quite significant.
Some benefits of an unsecured loan are:
- No security is needed on your loan.
- You can choose the amount you want to borrow
- You can spread your payments from between 1-7 years
