Tag Archives: collateral
Unsecured loans: Advantages abound
Unsecured loans have a charm of their own. You do not require any collateral and still they help you in countless situations. Unsecured loans can be used for buying a car, debt consolidation, home improvement, holidaying, education, wedding, etc.
Since unsecured loans do away with the requirement of security, lenders want to make it doubly sure that any borrower who takes out unsecured loan has the capability to repay the loan amount. The basis on which unsecured loans are granted include:
Credit history of the borrower
Income of the borrower
Repayment capability of the borrower
Goodwill/creditworthiness of the borrower in the financial market
Unsecured loans are available in the financial market in the form of unsecured personal loans, unsecured debt consolidation loans, unsecured home improvement loans, unsecured wedding loans, etc. Like all other unsecured loans, the lender imposes greater restrictions here also. The absence of collateral makes the lender wary of his loan amount. Although the lender has legal options open to him in case of non-repayment of the loan amount by any borrower, this process is quite a lengthy one. That is why lenders charge more interest rate and try to minimise their risk in case of unsecured loans.
As from the point of view of the borrower, unsecured personal loans are very much advantageous. Firstly, there is no restriction on its usage. Borrowers can use unsecured personal loans for any purpose they want. Secondly, unsecured personal loans help borrowers in avoiding the risk by eliminating the requirement of collateral.
Normally, unsecured loans can be availed from £250 to £25000. The amount of loan is different in case of different loan plans. Every lender has several loan plans and they float them in the market to differentiate their financial products from the products of the other lenders. So, it is always better to compare different loans and arrive at a good conclusion.
Unsecured loans A sub-type of personal loans
It is a known fact that in a secured deal, collateral protects the lenders investment, and thus makes it easy for him to part with his money and facilitate the borrower with loan benefits like quick attention, high credit limit, competitive low APR, variety of rate plans, different repayment methods, and negotiable loan terms and conditions.
Unsecured loans, a sub-type of personal loans, do not offer the above-stated benefits. But, they are still catching up in the UK loan market. So, what are the reasons behind the growing popularity of unsecured personal loans?
The most significant reason is that irrespective of the loan seekers capability and willingness to pledge collateral, this personal loan sub-type can be availed by all tenants, students, homeowners and property owners.
We all know that homeowners and property owners can easily take advantage of their valuable assets to avail favourable secured loan deals. However, pledging collateral may not be always practical or essential.
Hence, unsecured loans is a better alternative for people who are capable of offering collateral, but are unwilling to get into property related legalities or risk their property for a small monetary requirement.
Also, as every UK resident is not a homeowner or a property owner, unsecured personal loans is the only credit option for people who are incapable of offering an asset as collateral tenants and students. This no collateral attribute in turn leads to:
Less paperwork and quick service in the absence of lengthy property evaluation procedures
No immediate risks in the event of repeated defaults or non-repayment of the loan amount
Hence,unsecured loans are ideal for small monetary requirements, as offering collateral may be unnecessary. And, for urgent requirements too, as getting into extensive property evaluation procedures may be unfeasible.
Besides advantages, no collateral attribute has disadvantages too, as the lenders investment remains unprotected limited amount, high interest rates, fixed payback option, and preset loan terms and conditions.