Available for a range of different amounts and repayment terms
Not secured against any asset
No restriction on the purpose of availing loan
Amount available usually ranges from £500 to £25,000
Loan tenure may stretch from 6 months to 10 years
Different lenders offer different APRs
Most borrowers wonder that if nothing is secured, then on what basis the loan amount is calculated for unsecured personal loans. There are many factors that play a vital role in deciding the amount to be granted as unsecured loans. Some of the parameters are listed below:
Credit History of the borrower- A borrower with few arrears, defaults, and miss payments is more likely to get a greater amount than the one who has an unhealthy credit record. So, better the credit score of the borrower, higher the amount granted as unsecured loans
Disposable income of the borrower- By disposable income, one means the approximate income of the borrower left per month after paying all living expenditures, instalments of other loans and credit card payments etc. On the basis of this, the lender decides how much amount the borrower will be able to pay as the instalment of the new loan
Debt to income (DTI) ratio- This determines the affordability of the borrower. DTI is calculated by dividing the monthly income of the borrower by his expenditures. This reveals the paying capacity of the borrower. If the DTI ratio is more than 0.36, the borrower will get a good amount as unsecured personal loans
Credit policies of the lender- Every lender has a different credit policy. So, the loan amount, tenure and the APR charged is subject to the lender's criteria. For instance, the high street banks may not at all provide unsecured personal loans to those with bad credit history; whereas, an online lender may approve the loan
There are innumerable factors that help in determining the loan amount of unsecured loans, the major ones being discussed above. The borrowers' requirements and say also works. In most cases, the borrowers mention the purpose for which they are procuring unsecured loans in the loan application form. As per the purpose, the lenders grant unsecured loans.
About The Author: The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. He has done his masters in business administration and is currently assisting Shakespearefinance as a finance specialist.
For more information about unsecured loan please visit: http://www.shakespearefinance.co.uk This article is free for republishing
Source: http://www.articlealley.com/article_148795_19.html
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