Loans UK - Unsecured Loans FAQ
An explanation of Unsecured loans with pros and cons over other types of credit.
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What is an Unsecured loan?
A UK unsecured loan is a debt obligation which is not backed by the pledge of specific collateral unlike a mortgage where your house is collateral against the loan. People with bad credit may be ineligible for this type of loan.
These loans differ from secured loans by the fact that they in theory provide less risk to the person taking out the loan due to the fact that their house is not used as insurance on their payments. Whilst this is true in theory, it is common that once someone who has taken out an unsecured loan defaults on their payments, they will have court proceedings taken against them and their home.
This could in effect result in the loss of their home, turning what was once a less risk loan into a secured loan. Be extra careful to ensure that you can keep up the payments on these loans. Loan companies often act aggressively on payment defaulters to ensure the stability of their investment.
Are Good Credit Rating And Credit History Are More Important With Unsecured Loans ?
A good credit rating is perhaps the most important factor in determining the success of your loan application. Due to the fact that you are not legally providing your house as collateral. Loan companies need to see that you are a responsible citizen able to repay your debts. This is done in the form of a credit check where the loan company will see what is known as your credit score and thus your credit rating. This rating is based on many variables such as employment history, existing debts, how long you have taken to repay your bills in your lifetime and much more. Since unsecured loans are more difficult to get you will have to show a very good credit rating to be successful in your loan application.
Are Interest Rates Higher?
You will pay higher interest rates with these loans than you will with secured loans. This again is due to the increased risk of the loan company.
Are Unsecured Loan Applications processed quicker ?
Loan application for Unsecured Loans will be processed more quickly than for a secured loan.
Are you struggling to get a loan to make debt repayments more manageable?
We specialise in helping people who have been declined a loan elsewhere. We will endeavour to find the most suitable product for you with the best rate possible. Contact one of our advisors today for a free quote.
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This material is for general information and only constitutes advice in the broadest of terms. You should not rely on this information to make any decisions. Call our advisors on 0800 043 2444 for professional advice for your own particular situation.