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Unsecured Loan- For non-homeowners as well as homeowners
An Unsecured Loan does not use your property as a guarantee or collateral against the home. Thus, the risk involved for the borrower is low in an unsecured loan deal. These loans can be used for any purpose and are also called personal or consumer loans. The loan amount for unsecured loans is granted on the basis of the credit worthiness of the borrower. This is judged by evaluating the credit score and DTI (Debt to consolidation) ratio of the borrower. Unsecured loans are viable options for the following.
Sometimes, due to unavoidable circumstances like job loss, illness, accident and similar others, the credit score of the borrower gets adversely affected. This creates problems for the borrower to get unsecured loans easily in future. But, with bad credit unsecured loans becoming popular in the UK loan market, borrowers with bad credit history have taken a sigh of relief. A bad credit unsecured loan can earn the following benefits for the borrowers.
Though bad credit unsecured loans also call for high interest rates since the lender’s risk involved in the loan deal is equally high. This is because there is no assurance for the lender that the borrower will repay the loan amount. Neither does the borrower have decent credit history to satisfy the lender with his credit worthiness, nor does he have any security to offer that can be repossessed by the lender in case of default on loan. So, charging a high interest rate on bad credit unsecured loans is legitimate on the part of the lender.
So, whenever your finances fall short and you don’t have or don’t wish to pledge your home as security for the loan, apply for an unsecured loan. This loan helps in getting fast cash as the processing of unsecured loans is really quick because of the elimination of legal formalities like property valuation by th lender.
The pros and cons of secured loan UK
The whole concept of secured loan in UK revolves round collateral. Collateral is a technical term which means the property that is used as security in a loan. Any property of significant money value has acceptance as collateral. However, in UK a home is most frequently used as collateral. Though secured loans in UK are offered against the equity available in a home, in special cases no or zero equity is also accepted.
Some people find it risky to take loans against their home. Being aware of the fact that they will have to lose their property if they fail to pay off the loan, they shrink back from taking secured loans. It cannot be denied that there is risk of property repossession in this type of loan. Yet, all people do not avoid taking them. Rather, plenty of people think of it as a cost-effective method of raising fund. In fact, there are genuine reasons behind the popularity of secured loans in UK.
First of all, it is a gainful bargain for the borrower. He gets the chance to undertake a major financial venture as this loan allows him to take out a hefty amount of money. He has the leverage to borrow as much as his home equity lets him to. Even in some cases he can borrow more than his home equity allows. There are lenders who sanctions loan amount of up to 125% LTV.
Besides, secured loans UK offer high level of flexibility in repayment terms. Longer duration of time to repay the loan, low APR, smaller monthly instalments are all awarded to the borrower. This is done as reciprocation to the gesture he shows by offering collateral. Moreover, the lender also gets the freedom to use the amount advanced by personal secured loan UK for a plethora of personal needs. So far the risk factor is concerned; all the flexibilities mentioned here are enough to back the borrower to easefully pay off the loan and avoid property repossession.