Overview
of unsecured loans
As
the name implies, an unsecured loan does not require the
borrower to put up any security against it.
An unsecured
loan is a personal loan where the lender has no claim on a
homeowner's property should they fail to repay.
Instead, the
lender is relying solely on the ability of a borrower to
meet their loan borrowing repayments.
People who opt for
unsecured loans are usually those who are not in a position
to offer collateral or those with adverse credit records,
county court judgments, mortgage arrears or debt issues.
By their very nature,
unsecured loans involve the lender taking more risk – for
which the interest rate is increased.
However, while a bad
credit history will not necessarily bar you from an
unsecured loan the interest rates will reflect the lender's
increased risk.
The risk will be reflected,
too, in the lender's tolerance of late payments.
Without any
collateral, the lender will be quicker to take legal action
to recover missed instalments – and in such cases, the
lender will usually demand repayment of the full amount
borrowed plus interest plus legal costs incurred.
In such
cases, court proceedings could lead to your home being sold
to raise the money.
The amount you are able to
borrow can start from as little as £500 and go up to
£25,000.
Because you not securing the money you are
borrowing, lenders tend to limit the value of unsecured
loans to £25,000. The repayment period will range from
anywhere between six months and ten years.
Overview
of unsecured loans |
