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.