Are unsecured loans the safest loan option?
In simple terms, an unsecured loan is any loan that does not require a deposit, security, guarantee or surety in assessing a specified amount for approval. These loans are short term (provide a short repayment period) and are aimed at smaller loan amounts.
A revolving loan, overdraft facility or a line of credit can be considered to be types of unsecured loans. These allow you to access the funds when needed and don't have an instalment plan or a due date within which the full amount needs to be settled. However, the loan needs to be serviced in monthly payments covering the interest as well as any additional charges.
Top Tip - The full scoop on loans for bad credit can be found by returning to my homepage.
A revolving loan, overdraft facility or a line of credit can be considered to be types of unsecured loans. These allow you to access the funds when needed and don't have an instalment plan or a due date within which the full amount needs to be settled. However, the loan needs to be serviced in monthly payments covering the interest as well as any additional charges.
Top Tip - The full scoop on loans for bad credit can be found by returning to my homepage.
What Are The Requirements?
To apply for an unsecured loan, you will need to provide the following information:
- Proof of income in the form of recent payslips or bank statements over a 3 month period. This information is used by the loan provider to determine your ability to repay the loan as well as to evaluate an affordable loan amount.
- Proof of residence such as a lease agreement or water and lights bill. Your loan provider will need to know where to find you if you default on your loan repayments.
- Permission to access your credit record and determine whether you have a bad credit rating or if you have been blacklisted for non-payment of any current or previous debt.
Can You Apply For An Unsecured Loan If Have Bad Debt?
There are certain loan providers who will approve loans for individuals who have a bad credit rating and cannot provide some form of security or surety that the loan will be repaid. However, there are some downfalls to opting for these kind of loans.
You need to be aware that you will be paying an increased interest rate, service fees and other charges related to the loan amount. It is best to only apply for these loans over a short term and in a small amount.
You need to be aware that you will be paying an increased interest rate, service fees and other charges related to the loan amount. It is best to only apply for these loans over a short term and in a small amount.
What Are Not Types Of Unsecured Loans?
Vehicle finance is not considered to be an unsecured loan. You may be required to provide an upfront security deposit which is normally calculated at between 10% and 20% of the total loan amount. The vehicle itself will stand as security for loan and will be repossessed should you be unable to repay the loan.
A mortgage or property loan functions in a similar way where a deposit is required and the property stands as security for the loan amount. Property loans normally carry the longest repayment period.
Personal loans in an amount that exceeds your income can also require security. Security can be in the form of collateral, a lieu against an asset or surety from a guarantor who is in good financial standing. You may also be required to provide a guarantee for a personal loan in the event that you have a bad credit history or have been blacklisted.
For further insight into the difference between unsecured and secured loans, please check out the following Money Advice Service article - https://www.moneyadviceservice.org.uk/en/articles/secured-and-unsecured-borrowing-explained
A mortgage or property loan functions in a similar way where a deposit is required and the property stands as security for the loan amount. Property loans normally carry the longest repayment period.
Personal loans in an amount that exceeds your income can also require security. Security can be in the form of collateral, a lieu against an asset or surety from a guarantor who is in good financial standing. You may also be required to provide a guarantee for a personal loan in the event that you have a bad credit history or have been blacklisted.
For further insight into the difference between unsecured and secured loans, please check out the following Money Advice Service article - https://www.moneyadviceservice.org.uk/en/articles/secured-and-unsecured-borrowing-explained