Unsecured Loans- loans without collateral

Many a times, financial crisis makes it difficult for the life cycle to move smoothly. This is the time when we look for loans. We can either pledge our house and get the required loan amount and repay it in monthly installments. But, what if we don't possess a home or don't want to risk it? In these events, unsecured loans are the most viable options. These loans give the borrower the liberty to raise funds without placing any security. Unsecured loans are not guaranteed with any asset, so the risk of repossession doesn't exist. Though, the lender can still take a legal action and sue the borrower in the court of low, in case he defaults on the repayments. Unsecured loans are more expensive than their secured counterpart because it has greater risk for the lender.

Unsecured loans essentially have the features cited below.

The sum of money granted by the lending institution is not secured by any collateral

The lender gives the loan solely on the basis of credit worthiness of the borrower

The lender conducts a thorough credit check to evaluate the paying ability of the borrower by scrutinising his past records

The loan amount can vary anywhere in between 500 to 25,000 pounds.

The loan tenure ranges from 6 months to 10 years

The rate of interest is higher than the secured loans because the lender compensates for the risk involved for him

The processing of unsecured loans is quick because of the elimination of legal formalities concerning property evaluation etc.

Unsecured loans call for less documentation since property papers are not involved

In case of default on repayment, the lender can sue the borrower in the court and a CCJ (Country court judgment) may be issued against the borrower.

So, unsecured loans have its pros and cons like other loans. One should analyse everything logically, keeping one's financial requirements and credit profile in mind and thereby, compare unsecured loans and apply for the best.

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_146588_19.html