For Homeowners and Tenants

By: Aisha Cristal

Loans of the unsecured variety are a layman's delight. These loans are offered without the need for the borrower to put up any collateral as security. Unsecured loans come with their own set of pros and cons.

Unsecured loans are rife in the market today. Their popularity may be down to the feature that anybody can avail this loan type. In other words, both the homeowner and the tenant can avail of this loan type. Homeowners can go for unsecured loans if they feel that putting collateral is too much of a risk. Tenants avail this loan as it is the only feasible option for them.

Unsecured loans can be availed from a number of institutions, like building societies and traditional banks. These days, there is the option of the Internet, a portal to a limitless world that has taken the consumer market by storm. The market for loans is no exception.

However, people availing loans have to do so with discretion and a certain amount of prudence. There are a lot of loan sharks (unlicensed lenders) in the market, who seemingly offer the best loan deals from the outside. These loans come with extra and hidden charges.

Unsecured loans start from ?500 and can go up to ?25,000. The interest rates are higher with this loan type. This is primarily due to the lack of collateral with unsecured loans. The lenders tend to do this as a way of keeping a margin against a potential default from the borrower's side.

Recent trends in the UK have further amplified the popularity of unsecured loans, or it should in due course of time. There was an unprecedented increase in the number of collateral repossessions in 2006. That was perhaps a reflection of people taking loans haphazardly, owing to the numerous benefits associated with secured loans, like a big borrowable amount and a long repayment term.

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