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What
is an unsecured loan?
A UK unsecured loan is a debt obligation which is not backed
by the pledge of specific collateral unlike a mortgage where
your house is collateral against the loan. People with bad credit
may be eligable for this type of loan.
These loans differ from secured loans by the fact that they
in theory provide less risk to the person taking out the loan
due to the fact that their house is not used as insurance on
their payments. Whilst this is true in theory, it is common
that once someone who has taken out an unsecured loan defaults
on their payments, they will have court proceedings taken against
them and their home. This could in effect result in the loss
of their home, turning what was once a less risk loan into a
secured loan! Be extra careful to ensure that you can keep up
the payments on these loans. Loan companies often act aggresively
on payment defaulties to ensure the stability of their investment.
A Good Credit
Rating And Credit History Are More Important With Unsecured Loans.
A good credit rating is perhaps the most important factor in
determining the success of your loan application. Due to the
fact that you are not legally providing your house as collateral.
Loan companies need to see that you are a responsible citizen
able to repay your debts. This is done in the form of a credit
check where the loan company will see what is known as your
credit score and thus your credit rating. This rating is based
on many variables such as employment history, existing debts,
how long you have taken to repay your bills in your lifetime
and much more. Since unsecured loans are more difficult to get
you will have to show a very good credit rating to be successful
in your loan application.
Higher interest
rates are the norm.
Unsecured
Loan Applications Will Be processed more quickly.
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