3-12 Month Repayment
Rates from 278% to 1576%
3-36 month repayment
Rates from 4.7% to 278%
Unsecured Loans: How they are different from secured loans and the options that you can consider
When you take out a loan from a lending institution, the lender will normally grant you the money that you intend to borrow so long as you agree to its set of borrowing terms and conditions. And depending on your credit worthiness, they may also require you to provide more than just your signature and promise to repay the loan according to the agreed terms and conditions.
In the UK and in the rest of the world for that matter, there are normally two main types of loans that you can avail: secured loans and unsecured loans. Below, we will look at how they differ from each other and some of the unsecured options that you can consider if you decide to apply for the financial products.
Secured loans in the UK
Secured loans are those types of credit agreements that are backed by a certain asset or collateral. Once you sign the dotted line, it will cover a condition that the bank or lender has the legal right to seize the agreed asset in the event that you will be unable to pay back the loan according to the agreed terms and conditions. The most common types of secured loans in the UK are:
- Home Loans
- Auto Loans
- Logbook Loans
- Pawnshop Loans
Now losing a valuable asset is just one of the many possible penalties that will be levied against you once you default from your repayments. You could also be facing tough charges and a damaged credit rating as well and this will prevent you from taking out other loans in the future.
But amidst the real risk of losing an asset and more, secured loans continue to be an appealing option to many borrowers in the UK because of the higher borrowing amounts, longer payment terms, and lower interest rates that they provide.
Unsecured Loans in the UK
Unsecured loans meanwhile are credit agreements that are not backed by any asset or collateral that the lender can seize in the event of defaults. But because there is no security in the part of the lender, you will need to have a good credit rating and a reliable income level to become approved. Some of the unsecured loans that you can access in the UK lending market include:
- Personal Loans
- Student Loans
- Guarantor Loans
- Business Loans
- Joint Loans
- Payday Loans
- Doorstep Loans
- Credit card loans
Unsecured loans also have higher interest rates than their secured counter parts and have smaller borrowing amounts and shorter payment terms as well because of the absence of security.
Similarities between secured loans and unsecured loans
Whether it’s an unsecured loan, secured loan, or anything in between, lenders will always try to evaluate your credit rating and obtain a copy of your credit file from UK’s major credit reference agencies before they approved your application.
They will also report all your credit activities which means that if you are on time with your payments, then it will paint a positive picture in your credit history. But the same can be said if you become late from your payments and default from them completely. Failing to maintain the proper repayments according to the agreed terms and conditions can negatively impact your credit history.
How to obtain unsecured loans in the UK
Fortunately for you, there is an abundance of lenders both online and offline who are ready and able to carer your need for an unsecured loan in the UK. The kind of process that you will have to complete however will vary from lender to lender. The same goes for the payment terms, borrowing amounts, and interest rates of your unsecured loan agreement.
Here are some of the lending companies that you can look into if you are looking for unsecured loans in the UK:
- Online lenders
- Payday Lenders
- Private Lenders
- Credit associations
- Building societies
- High-street lenders
- Peer to Peer lenders
The kind of lender that will suite you and your needs best is up to you to find out. Doing a bit of research and asking around should be able to help you land the right decision for your financial needs. And once you do find a suitable place to apply for unsecured loans, be sure to compare the existing rates, payment terms and conditions, and other important aspects that will help you secure the right deal for the best price.
Important considerations before applying for unsecured loans
Thanks to an extremely competitive lending market, majority of lenders, especially those that operate online, have made sure that the application process and approval procedures for unsecured loans are as quick and seamless as possible. This allows them to a close a credit agreement with a qualified applicant faster than ever before. In fact, you can expect to complete an unsecured loan transaction in just a couple of hours and get approved shortly after. And if you are approved, you can even get the money in the same day!
But in the end, no matter how fast the loan transaction, you will still need to follow a set payment terms and conditions so you can protect your credit rating and avoid incurring penalties and extra fees. So before you search the market for unsecured loans, here are a few questions that you might want to think about:
- Make sure that you can genuinely afford the loan based on your monthly earnings and outgoings.
- Take out the least possible interest rate your can qualify for. The lesser your interest rate, the cheaper the loan deal will be for you.
- Find a loan that does not have any hidden fees and surprise charges. Be sure that you know any and all fees attached to your loan deal prior to signing the legally binding agreement.
- Choose an unsecured loan agreement that will allow you to make advance repayments so you can save more on lesser interest rate payments.
Final thoughts on unsecured loans
Unsecured loans are ideal financing options in times of emergency situations, when you are strapped of cash and there are unforeseen bills and costs that you need to cover. Secured loans, on the other hand, are better options for major purchases like homes and cars. Unsecured loans are also great options to consider if you are someone who has a stellar credit rating.
305.9% APR. £400 borrowed for 90 days.
Total amount repayable is £561.92 in 3 monthly instalments of £187.31.
Interest charged is £161.92, interest rate 161.9% (variable)
Loanovao is NOT a lender – we are a licensed broker working with the most popular direct lenders in the market to find you the most suitable short-term loan plan. Our FREE quoting service compares more than 40 lenders quickly and finds you a lender with the lowest rate that they are willing to lend to you today.
Rates from 45.3% APR to 1575% APR – we provide a no obligation quote, your APR will be based on your personal circumstances