A Guide to Non Secured loans for UK Residents

The requirement of money can be to anyone ? to the rich and the poor, to the employed and the unemployed, to homeowners and to tenants and anyone who lives. The loans you may obtain are basically of two types ? secured loans and non secured loans. In this article we would discuss and contrast these two types of loans and to explore how non secured loans or unsecured loans as they are more commonly known can be obtained at the best possible terms and conditions.

Secured loans can be obtained at rates better than unsecured loans. This can be attributed to the collateral that can be placed for security and that hedges the risk for the lender. The lender may liquidate the property in case of non payment and thus get back the capital but in case of an unsecured loan, the capital is as good as lost.

Let us look at the differences between the secured and non secured loans in a slightly greater detail:

1. non secured loansdo not offer any kind of security to the lender. This is availed by people who do not have anything that can be placed as a collateral or they do not want to risk anything that can be placed as this.

2. From the lenders perspective, these loans are more risky, there is nothing to hedge the risk. The lender wants to get an additional profit from such a loan and therefore these loans are provided at rates which are slightly higher than the secured loans.

3. The amount which can be loaned in an unsecured way is also lower than the secured loans. The secured loans are available for any amount up to nearly 80% of the equity of the house. Unsecured loans are thus obtainable for amounts ranging from ?500 up to ?25,000 or slightly more. It is difficult to obtain loans for amounts larger than this without placing a collateral under security.

4. The period for which you can obtain a non secured loan varies between 3 to 6 years. This may seem less than the above 20 year period for which a secured loan can be obtained but you would have to consider that the security for the lender is negligible and in such a case it is impractical for someone to risk a capital for a long period of time.

5. The rates for which an unsecured loan can be obtained varies between a large range ? from as low as 6% to as high as 12%. These are normally published APR's. The exact percentage that you would be able to obtain a loan for depends on various factors such as the amount of loan, the period of loan, the lender's comfort level with your financial status and most importantly the credit history of the borrower. If the credit history is good, it is possible to obtain the loans at rates nearly equal to the secured loans but if it is bad, rates could be very high and in bad cases, you may even be refused a loan.

6. Some studies say that since there is less of verification and documentation requirements, non secured loans can be obtained faster than secured loans.

Since the non secured loans for UK residents are obtainable for highly variable rates and there may be people out there who might be looking to take advantage of your situation, you should consider and weigh all options deftly before deciding upon one of them. You must shop wisely and pick the best option available at a certain time for your specific situation. You must also plan well for repayments and try to slowly build a good credit history. If you are able to do that, the line between the secured and unsecured loans for you would keep getting narrower and the next time you have to opt for a loan, you would be in no trouble even if you yet do not have a collateral.

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