Unsecured and Secured Personal Loans - When to Take?

Personal loans come in two varieties: secured and unsecured. The type you choose will depend largely on what you need the loan for, and how much you need to borrow. Personal loans are typically used to finance debts that other brands of loans cannot cover: for example, you can take out a mortgage to finance a home purchase, so you would not need to take out a personal loan to cover it. On the other hand, you might need to borrow money to furnish your new home; in that case, you might apply for a personal line of credit to fund your new furniture purchase.

Unsecured Personal Lines of Credit

An unsecured personal line of credit, or unsecured personal loan, is made by a lender without requiring collateral on the loan from the borrower. Collateral is valuable property the borrower pledges against the value of the loan. If the borrower defaults on the loan, the lender can collect the collateral and may keep it or try to sell it to offset the balance owed on the loan. Because unsecured loans pose a greater risk to the lender, they generally carry a higher interest rate than secured loans. However, they are the most common kind of personal loan to obtain, as borrowers usually use these funds to consolidate debt, fund large extraneous purchases, or pay off medical debt.


Secured Personal Lines of Credit

A secured personal line of credit, or secured loan, is made by a lender to a borrower who has pledged collateral against the value of the loan. This collateral must be liquid enough to be sold quickly and at some value in the event the borrower defaults. Common types of collateral include: jewelry, vehicles such as motorcycles or scooters, musical instruments, antiques, and the like. Because the risk to the lender is lower than with an unsecured loan, these loans generally carry a lower interest rate. On the other hand, the lender and the borrower may disagree about the value of the collateral; therefore, the borrower should have a written appraisal from a third-party available when pledging collateral against a loan.

Which Loan Type is Best for Your Situation?

Generally speaking, if you take out a secured personal loan, you should be prepared to lose your collateral; that is, don’t pledge a family heirloom if you may not be able to pay the loan back. Unsecured loans don’t carry the same risk to the borrower but they do cost more in the long run due to the higher rate of interest. Whether you take out a secured or unsecured line of credit, never borrow more than you can pay back within a reasonable amount of time.

Unsecured Personal Loans - Loans For Every Needed Individuals

Unsecured personal loans are the loans which are cash in advance from financial lenders and that too without any collateral. When it comes to finances, people usually take help from the near relatives, friends or from family members but it might happen that they also do not have money to provide to the individual. Here applicant does not have to pledge any security and no evaluation of credit ratings are required by the lenders.

Absence of the collateral is the main feature and with this feature borrower can easily meet personal needs. These finances accomplish the demands of the borrower. Amount and repayment term varies from person to person. The amount that can be availed is approved on the basis of applicant's income status and his/her repayment capability. A person can easily apply for the cash and use it for many purposes such as for home renovation, utility bills, consolidation of debts, room rent, school fees, traveling, credit card dues, electricity bills, grocery bills, etc. Borrowers with bad scores can easily apply like CCJs, foreclosures, missed payments, bankruptcy, IVA, defaults, insolvency, etc. These people have to pay high interest rate because of the unsecured nature and lack of collateral.

Here are some eligibility criteria which are necessary to be filled by the applicant:

• Applicant must be the citizen of UK;

• Applicant must possess a valid bank account in UK;
• Applicant must attain the age of 18 years or above;
• Applicant is doing a steady job and earning a sound source of income.

Interest rate is high here because the nature of these finances is unsecured. Unsecured personal loans are opted by tenants and non homeowners who want swift cash without pledging the guarantee. These are small term loans and amount that the applicant can avail can be used for many purposes. The amount that is available varies from £1000 to £25000 with easy repayment and installments. Applicant can benefit from repayment term which is up to 6 months to 10 years.