Guide to Unsecured Personal Loans
Unsecured Personal Loans in the UK offer a viable alternative to secured loans, they require no collateral but are often difficult to qualify for, as the prospective borrower will require a good credit history to be eligable.
Unsecured personal loans in the UK are available from banks and building societies. UK loans are generally divided into two categories: secured loans and unsecured loans. With an unsecured loan, one borrows money on good merit. That means no collateral is needed, such as with a secured UK loan. However, one needs an untarnished credit history to be given a personal loan from a UK bank or building society. This will show the lender that one is capable of honoring a loan agreement.
One should be able to understand what a credit score means before he/she attempts to borrow a large sum of money. Depending on what one's score is, an unsecured UK loan may be out of the question. Some people have bad marks on their credit report, while others have little or no credit at all. Young adults, fresh from financial dependency on their parents, will generally need a few years to build up a reliable credit score. In any case, both bad credit and no credit is unfortunate for someone wanting to borrow money with no collateral down.
Generally, there is a minimum amount of £1000 for borrowing with an unsecured personal loan. However, some lenders may go as low as £500, depending on the circumstances and the customer's standing with the bank or building society. The common maximum amount for a UK unsecured loan is £25,000, but smaller lenders may not be able to go that high. For those wishing to borrow more than £25,000, one will have to look to a secured loan. Typically, a home is used as collateral for such a large amount of money. This insures that the lender will not lose a lot of money, should the borrower default on the loan.
An unsecured personal loan in the UK will generally have a higher interest rate attached to it than a secured personal loan. It is advisable that a borrower compare offers before settling on one. Various banks and building societies will offer different deals, so one should never take the first offer. There are two different kinds of interest rates: fixed and variable. A fixed interest rate will stay the same until the loan is completely paid off, meaning that monthly invoices will never change. A variable interest rate is subject to rise and fall, depending on the market. Some people go with the latter kind of rate because they are going in with cheaper rates. However, one should be aware of the market's capricious nature.
There is no "best" or "better" kind of UK loan out there for borrowers. Secured loans are more suited for some, while unsecured personal loans are suited for others. Those with an impeccable credit history will generally look at an unsecured UK loan first, but those seeking a great amount may want the alternative. Whatever one decides to do, it is best to conduct as much research as possible and never go into any kind of loan if it is questionable whether or not one can honor the agreement. Defaulting on a loan is a serious thing that will haunt an adult for years, so always tread lightly when borrowing money.
Written by Amy Cottrell for UKLoansPortal.co.uk