Unsecured lending simply put, means that there would be no collateral required to be able to attain the loan. If one does not have the required possessions like an own home, a good vehicle or anything else to mortgage against which the required capital can be raised, unsecured lending is the way out. And the good news is that things have changed from what they were a couple of years ago. Due to stiff competition in the lending industry, it is easier to procure unsecured loans today, at cheaper rates than were possible and for a higher principal amount.
Let us have a look at some statistics. It is possible to get an unsecured lending I the UK now anywhere between £500 and £25,000. The interest rates which used to be above of 15% have also fallen dramatically. You can acquire these loans at anywhere between 9% and 17%. It does depend on your credit history, your financial standing and circumstance and the amount of loan though. The point to be noted here is that a bad credit history does not stop you from getting an unsecured lending but the rates might be a trifle higher than the normal advertised lending rates.
Unsecured lending is of typical interest to people who are not very well settled in life already but see a good growth path for them. Let us say you want to start a business and are falling short of some money – you know that a few months down the line, this amount will be easy for you to refund and you do not want to lose this opportunity, then unsecured lending is the appropriate route to take. Or for that matter, if you have just landed a plum job which you know is yours for quite some time, then you can acquire all you can value for or pay for any immediate need through unsecured lending. The key decision making points here are the absence (or the reluctance to stake) of a collateral and the guaranteed ability to pay off the borrowed amount in the pre decided installments.
The important thing to keep in mind here is that not putting a collateral does not mean that the lender can not put any stake on your belongings. You need to be specifically clear of the repayment installments and must put it into your financial planning. If you do not repay the installments repeatedly, the lender can definitely complain and put your belongings at risk. Worse, it spoils your credit history which is held against you for all future loans and financial activities. Early loaners must specifically understand the value of building good, strong credit credentials.
A synopsis of when unsecured lending is the right way to go and how it scores better for individuals on certain points is:
Unsecured lending does not require collateral, so it does not involve repayment before being able to use you belongings, they are also not put to risk.
Unsecured lending formalities are mostly completed faster than the secured lending ones – the collateral does not need to be evaluated and verified, so the money comes to your pocket sooner.
If the credit history is good, you can mostly bargain a good interest rate, as low as 9% which is only marginally more than what you get for secured loans.
If the amount required is low, it is very easy to obtain unsecured lending.
So, if you do not have either capital or collateral at hand it does not stop you from lending money in the UK. If you are assured of a steady flow of income (at least ones you have obtained your loan) and the amount you intend to get is not upwards of £25,000, unsecured lending is a viable option and must be explored. The key is to be aware of the lender's fine print and be timely for repayments to build a healthy credit statement. A cleverly judged and well researched unsecured loan is as good as, if not better than, any other form of lending money.
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