|
By Andrew Baker
Watching more and more people fall in the trap laid down
by the secured loans, you resolved never to take debt help
from the lending organisations. Nevertheless, as and when
need arises, the lending organisations do have to be approached
for help. With the many changes that have taken place in the
lending scenario in the UK, you do not have secured loans
as the only option available. Unsecured loans have made their
mark as loans that are easily available from lenders at attractive
rates and flexible terms.
With more and more people losing their homes to the lending
organisations, the aversion to secured loans has grown. Unsecured
loans have gained from this aversion to secured loans. These
loans provide resources to the borrowers without requiring
them to offer their homes as collateral. This frees up the
equity in home to be used for other purposes.
The high rate of interest that is charged on these loans
is admissible. By offering loans to people without any security,
lenders are putting their funds to risk. The higher rate counter-weighs
the higher degree of risk involved. Lenders however, make
their assurances regarding the credit behaviour of the borrower
through the borrower’s bank, and other organisations
with which the borrower deals.
A good credit history is a prerequisite for unsecured loans.
A bad remark on the credit file may dither many lenders in
the UK from offering loans to such borrowers. Lenders undertake
credit scoring to be on the safer side. Credit scoring is
the method through which lenders assess the credit worthiness
of a borrower. The borrower is asked to answer a few questions
in the application form. The answers to these questions form
the basis of the points that are allotted to a borrower. If
the mark obtained by a person is above the set mark, he is
accepted for being offered unsecured loans.
If he fails to cross the mark, he may either not be offered
the loan or may have to shell a higher amount in the form
of interest. The borrower may not get the desired amount and
have to make do with the smaller amount. However, this does
not give a generalised view of all the lenders. Each lender
follows a different method of credit scoring. Thus, failure
to qualify with one lender does not mean an end to the loan
hunt. There may be other lenders who are ready to supple their
terms to include the borrower.
Tenants and other homeless people constitute a major group
of borrowers of unsecured loans in the UK. However, they are
not as fortunate as their counterparts with homes. While tenants
have to choose unsecured loans as the only option available,
those with homes turn down secured loan offers in order to
save their homes. Tenants may however have to be disappointed
with some lenders since they make it necessary for the borrower
to have a house, even though it is not accounted for the collateral
purposes.
Unsecured loans are made available to people who are on income
supports. Income support is an income related benefit normally
available to people above 60 years of age. These are allowed
to people who do not have enough income to meet their basic
needs, or whose savings ranges from £8000 to £12000.
Unsecured loans can be used by these people for a variety
of purposes. The amount received through income supports will
be used to repay the monthly instalments.
Unsecured loans are like regular loans in the other aspects.
The process starts with the borrower requesting help through
the application. The mode of application may be different
for different people. Online applications rule the roost,
with majority of the customers choosing the online method.
Next comes the telephonic applications. However, the absence
of any written record makes them less popular. Lastly, borrowers
may choose to personally visit the lender and make the application.
This has become tedious now because of the number of lenders
in the UK increasing appreciably.
Work on the application starts immediately. Lenders search
for the various offers available with them and with partner
lenders. The lender offering a faster approval is more preferred.
Unsecured loans are customarily approved faster than the secured
loans. Most of the time that is taken in approving the secured
loans goes in valuing the property. Since no collateral is
required, there is no need for property valuation. Thus, unsecured
loans are made available to borrowers promptly.
Unsecured loans have gradually made a place as a source of
finance. Lenders, no longer consider unsecured loan borrowers
with distaste. Lucrative deals are offered to people going
for unsecured loans. They are now being used in all areas
that earlier secured loans used to cater. Debt settlement,
real estate purchase, and car purchase are some of the uses
that borrowers put the loan amount to. Thus, unsecured loans
have proved a better alternative to the secured loans.
Summary
The constant fear that accompanies secured loans vis-à-vis
the repossession of the homes is done away with in an unsecured
loan. The lender offers assistance without the demand for
the title to the home. These attract a higher rate of interest.
Tenants and people with income supports too are able to avail
assistance through unsecured loans. Read more about unsecured
loans in this article.
Andrew baker has done his masters in finance from CPIT.
He is engaged in providing free, professional, and independent
advice to the residents of the UK.He works for the personal
loan web site http://www.loansfiesta.co.uk for any type of
uk secured loans and unsecured loan please visit
http://www.loansfiesta.co.uk
|
