Unsecured Loans: Lower Risk

By: Adam Jaylin

People prefer to take an unsecured loan because they can borrow this loan amount without offering any security to the lender. Now, such loans entail a greater degree of risk for the lenders, so they charge a high interest rate. However, due to stiff competition among the lenders, you can get a loan on competitive rates.

With an unsecured loan, if you fail to keep up the repayments, then the lender can't repossess your home or the property which you have kept as collateral. But, the lender can take legal steps against you in case you don't repay the loan amount.

Unsecured loans are more expensive, as you have to pay higher interest rates as compared to its secured counter part. But, this can be a useful loan option, where it is inconvenient or impossible to arrange a secured loan.

The lenders prefer to offer an unsecured loan to the people with low risk. Those having a good credit history and having a secured job can easily procure this loan option. An important benefit with this loan type is that you will not loose your home instantly if you don't keep up your repayments. This may affect your credit rating which can limit you to borrow money in the future.

With an the lenders have to follow the lengthy procedures if they want to hold your property as a security. But, the law is on their side and they can tell the solicitors to recover their money back.

County Court Judgments can be issued against you, in case of small amounts of debts. In the extreme cases the bailiffs can take your property and then auction it, in order to repay the loan amount. In case of a larger loan amount the lenders can take costly legal action against you, which will ultimately be borne by you.

The best way to avoid such problems is to take a PPI (Payment Protection Insurance) which can help you in mitigating risk in any unforeseen circumstances like accident or illness during the loan tenure.

Unsecured Loans
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