Getting An Unsecured Loan In The UK

Unsecured personal loans are one of the most common types of personal loans available in the UK. These loans don’t require the borrower to put up any collateral, making them appealing to many borrowers. They are also convenient in that you can obtain the funds you need regardless of your credit history. Here is how to get an unsecured loan in the UK.

What Are Unsecured Loans?

There are two types of personal loans: secured and unsecured. As the name suggests, an unsecured loan is a type of borrowing that one can get without any asset or collateral as security. You will find that most unsecured personal loans come with high-interest rates. The interest rates on this type of loan are usually in the range of 12% to 15%. This can make them expensive for borrowers who need cash immediately. Because of this, you should consider carefully whether the loan you are considering will be able to meet your needs before signing the dotted line.

You’ll find that many lenders are offering unsecured personal loans in the UK. Banks and some financial institutions, for example, specialize in providing credit cards which are a form of unsecured personal loans. Some credit unions may require to borrowers use collateral – such as a savings account – to qualify for a loan. Some direct lenders offer unsecured loans as an alternative to credit cards and credit union loans. The advantage of this type of loan is that you don’t have to place your property at risk to get the money you need.

Benefits of Unsecured Loans

Should You Get A Secured Loan Or An Unsecured Loan?

Both types of loans, secured or unsecured, have their set of benefits and drawbacks. Should you choose an unsecured loan over a secured borrowing? Here are some things that you keep in mind to come up with the right decision when you need to borrow money:

• Loan Amount: Loan amounts vary, but they are usually in the region of £5,000 to £25,000 (although smaller and larger sums are also possible).
• Loan Terms: The application for unsecured and secured loans is the same, but the terms of the loan are different as unsecured loans in the UK don’t need collateral.
• Interest Rates: Because these loans don’t require collateral for repayment, they are considered high-risk loans for the lender. This means that the lender is going to have to offer you a high-interest rate to compensate for your risk level.
• Purpose: Some individuals choose to take out unsecured loans to help them start up a business or pay for emergency bills. However, you must remember to use the money wisely and only use it for things that will improve your financial standing.

While the other requirements for obtaining an unsecured loan may vary for every lender or creditor, the basic qualification for a borrower is age, citizenship/residence, and salary/work information. If there’s an issue with your credit rating, it’s best to look for a loan provider that caters to people with bad credit.

Who Are Eligible For UK Unsecured Loans?

You should do a little bit of homework before taking out an unsecured personal loan. To begin with, assess your situation especially your capability to repay a loan. If you have no credit or poor credit, a traditional lender may be hesitant to give you a loan. In this case, you may be able to use a co-signor, which will mean another person willing to take the risk if you default on the loan. Or you can also look for a direct lender that specializes in unsecured loans for bad credit.

Before applying for an unsecured loan, you should consider using the lender’s loan eligibility calculator if available online. After furnishing your personal and financial information, the loan calculator can determine whether you meet the lending criteria of the company. This helps you avoid your loan application from being rejected. Upon applying for a UK unsecured loan, lenders will request detailed personal and financial data. Lenders will verify your identity and credit score. They may reach out to a credit reporting agency to give them an idea of financial behaviour. 

All lenders are legally required to verify that borrowers can afford to pay back the loan. Once you’ve obtained an unsecured personal loan, you may be given a 14-day cooling-off period if you wish to cancel the agreement without incurring any penalties.

Who Offers UK Unsecured Loans?

You can get started with unsecured personal loans by looking for a lender who specializes in these loans. There are plenty of these lenders available, and you can search for them using the Internet. You can find some lenders who will offer you a secured loan and some who will offer you an unsecured one. If you want to go with the latter option, remember that you will be placing your home up as collateral against the money you borrow. Because unsecured loans are unsecured loans, they are not backed by any collateral. This means that if you default on the loan, the lender is not going to take your car or house. If you pay back your unsecured loans, the lender is more likely to consider giving you a loan again in the future if you have shown responsibility by paying it back on time.

Final Word On Unsecured Loans

Unsecured personal loans do have advantages over secured loans, which is why some people prefer them. Unsecured loans offer the borrower a greater degree of flexibility. They are not tied down by collateral, but there is a greater degree of risk for the lender if the borrower defaults. You should however make sure that you are borrowing money from a reputable lender. A professional lender should be regulated and authorized by the Financial Conduct Authority (FCA). The FCA has a database of all firms that offer consumer credit facilities If you have any doubts about the lender so be sure to verify you’re dealing with a reliable firm before applying.