Unsecured loans are arguably the simplest and cheapest method of borrowing over a shorter term for those without substantial assets. They are types of personal loans intended for expenditure on large items (such as home improvements, holidays, cars etc.) when the person does not have the money available but could cover repayments on a loan from their monthly income.
What are Unsecured Loans?
Unlike with secured loans, an unsecured personal loan does not require the borrower to provide the bank with security – i.e. they don’t secure their loan against a valuable asset such as their home. Therefore, the risk of a customer’s property being possessed if they fail to meet the minimum repayment requirements is less than would be the case with a secured loan. An unsecured loan company or other lender will nevertheless expect their customers to stick to the legal terms of their unsecured loan and repay the debt.
Unsecured Loan Amounts
Personal unsecured loans are relatively easy to obtain as they are widely available from a variety of lenders (such as building societies, banks, online lenders, peer to peer lenders and even credit unions) for borrowing lower amounts of money over shorter periods of time. Quick unsecured loans (in the form of payday loans, same day loans or short term loans) are advertised on the market for those who need a cash boost of usually a few thousand pounds. A quick unsecured loan amount can, however, be anything up to £25,000 depending on the provider.
No Credit Check Unsecured Loans
No credit check unsecured loans are equally becoming prominent for borrowers who need a loan at very short notice for any urgent financial requirements. Lenders do not perform a credit check and instead provide their customers with money based only on the information provided in their loan application.
Bad Credit Unsecured Loans
Bad credit loans are often offered by lenders as unsecured loans. Bad credit unsecured loans are particularly targeted at those with a history of poor credit and who would be otherwise unable to take out a loan. Lenders of unsecured loans for bad credit will obviously only allow a customer to borrower a lower amount than they would with those with a good credit score, though they can be a great starting point for rebuilding a credit rating.
Nevertheless, as giving out a personal unsecured loan is already a risk for loan providers, an unsecured loan for bad credit will only increase this danger. Banks will be more likely to charge a disproportionally high rate of interest with a bad credit or no credit check unsecured loan to compensate for this risk. If the borrower is trying to get a loan for purposes of debt consolidation, it is advisable to contact one of the charities or other public bodies that offer free debt advice before taking on such a risky loan.
Cheapest Unsecured Loans
Most unsecured loan lenders offer their cheapest unsecured loan products to their customers who are borrowing larger sums of £7,000 or more, or those with a good credit history. Borrowers are advised to consider firstly taking out a less risky form of borrowing to build up their credit score if they want to benefit from cheap unsecured loans in the future.
Peer to peer loans can be some of the cheapest unsecured loans as there are no large financial institutions involved; lenders lend to borrowers via intermediary websites.
Unsecured Loan Fees
Customers will usually find themselves levied with fees if they make repayments earlier than their unsecured loan lender permits. Some unsecured personal loans may nevertheless provide borrowers with more flexibility over their monthly payments – so with a little research, they can source the cheapest unsecured loans out there.
Compare Unsecured Loans
To obtain the best unsecured loans most suitable for them, applicants should always compare cost estimations from unsecured loan companies to ensure they are getting the best deal. Loans are compared more easily when searching on the World Wide Web: many lenders offering online loans provide tools to allow comparison with products on the same or other websites.