What Is an Unsecured Personal Loan?
An unsecured personal loan is a type of loan that you take and pay back in full with agreed interest. This type of loan is a good option if you are looking to improve your home or buy a new car. As you take out the loan, it's important to keep up with the loan repayment terms so that you can have the opportunity to take another loan after repaying the first loan.
Advantages & Disadvantages of Unsecured Personal Loans
Advantages
The benefit of taking an unsecured personal loan include:
Quick access to money
An unsecured personal loan gives you immediate access to money to solve pressing financial challenges. Unlike traditional lenders and banks, online lenders will approve your loan request within a few minutes from the time of application.
Flexible repayments
An unsecured personal loan is highly flexible in terms of repaying back the loan to the lender. So, if you're looking for a loan with a flexible repayment plan, look no further than an unsecured personal loan.
Rebuild your credit score
Taking an unsecured personal loan can help you rebuild your damaged credit score, so long as you keep up with your monthly repayment responsibility. Building your credit rating means you will be able to take further loans for bad credit.
Disadvantages
Find the disadvantages of taking an unsecured personal loan below:
Higher interest rates
Generally, an unsecured personal loan comes with a higher interest rate on your repayments. While the repayment schedule is flexible, the repayment amount is huge due to the high interest rate.
Hard to borrow with poor credit
Since an unsecured personal loan comes with a higher interest rate, it becomes very difficult to access if you have a poor credit history. So, you must work on your poor credit first before sending in your application.
Penalties if you default
There are penalties if you fail to keep up with your repayment template. Even if you default for just one time, the lender will increase your interest rate, which will add to your monthly repayment amount.
Can I Get an Unsecured Loan with Bad Credit?
Of course, getting an unsecured loan with bad credit is possible. Aside from your credit score, we also check other important factors like your replayability and consistency to payment. If you're good in these two areas, we will send your application to a select lenders that we work with for approval
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Of course, an unsecured loan can hurt your credit because failing to repay any debt will have a negative effect on your credit. When you apply for a loan, the UK direct lenders take it upon itself to run a check on your credit worthiness. They will check your payment history, credit card limit, and whether or not your payment history has any negative information. If you have ever defaulted in the repayment of a loan at one point or the other, the lender will get this information from the credit check and will reject your loan application. So, it is important to fix any error or problem that you may have in your credit history before sending an application to a lender to obtain an unsecured personal loan.
How to Find The Best Unsecured Loans
While there are no hard and fast rules regarding how to find the best quick loans, sticking to the following rules will go a long way to help you strike the best deal:
Shop around
Do not just pick a lender and sign paperworks immediately. Take your time to shop around different lenders and their offers and fees. If you do not have the time to shop around different lenders you can contract the job to a licensed broker. The broker will help you shop for the best deal.
Check your credit score
Once you have identified a broker that you want to work with, the next step is to check your credit score to be sure that you have met the broker's requirements. Checking your credit score will help you identify and fix any error that may make the lender reject your loan application.
Check the terms
It is important that you go through or peruse the loan terms of a lender before signing a deal with them. What if you are not able to repay back your loan in record time? Will the lender write your account officer to freeze your bank account? Will they report you to the appropriate agency for default? Make sure you read through the loan terms line after line before signing any paperwork.
How much would you like?
Representative Example: Rates from 43.1% APR to 1333% APR. Minimum Loan Length is 1 month. Maximum Loan Length is 36 months. Representative Example: £1,200 borrowed for up to 75 days. Total amount repayable is: £1506. Interest charged is 0.34% per day, amounting to £306, annual interest rate of 124% (variable). Representative APR: 49.7% (variable).
FAQ (Frequently Asked Questions)
How Much Does a Personal Loan Cost?
There is no fixed amount charged by lenders for a personal loan. However, keep in mind that the fee payable to obtain an unsecured personal loan will depend on the amount obtained from the lender and the interest that you have agreed with the lender. Also, if you use a realtor to access the unsecured personal loan, keep in mind that you will have to pay the service charge of the realtor that helped you facilitate the loan.
What Can I Use an Unsecured Personal Loan For?
There are so many reasons you may want to access an unsecured personal loan. If you have emergency or unplanned bills to pay, you can reach out to a lender to obtain an unsecured personal loan to resolve such emergencies. The emergencies can range from hospital bills, electricity bills, heating or cooling bills, car repair, air conditioning system maintenance, house maintenance, as well as gas replenishment. Most of the lenders that you see online usually give out an unsecured personal loan that covers these emergencies that we have highlighted.
How Long Can I Borrow For
The length of time to take an unsecured personal loan depends on the amount that you want to take and the purpose you want to allocate the funds for. You can borrow money for as long as 10 years as long as they keep to the repayment terms. The ideal length of time to take an unsecured personal loan should not exceed one year.
What Happens If I Miss Loan Repayments?
Missing a loan repayment can adversely affect your overall credit rating. Additionally, the lender will be compelled to add extra charges and interest so that you end up paying more than the normal monthly repayment amount. In other words, if you miss a loan repayment, your interest rates will increase and your creditworthiness will be hampered.