If you’re new to borrowing money and you’re looking at unsecured loans, here’s your quick guide to better understand how the financial product works:
What are unsecured loans?
Unsecured loans are personal loans advertised with the promise of quick cash. If you need money to pay for an overdue bill or you want extra cash for your next vacation, unsecured loans are worth looking at. As its name suggests, unsecured loans do not require any security. If you meet the basic requirements and you have proof of income, you can easily apply for an unsecured loan and get approved within the day or even within hours after completing the application.
What are the different types of unsecured loans?
Unsecured loans come in different types. There are signature loans that only require your signature and proof of income. One common example of this type of loan is credit unions. If you’re a credit union member with good credit, you can get approved for a loan fast. Another type is called payday loans, which are ideal for borrowers with bad credit. All you need is to meet the basic requirements and your recent pay slips to avail the loan. Credit cards also fall under the unsecured loan category.
Who are unsecured loans for?
Unsecured loans are for people who only need a small sum of money for immediate financial needs. Be it an overdue bill, a medical emergency or for groceries, unsecured loans offer short term financing at your disposal. Unsecured loans are also for people with bad credit problems. If you can’t get approved for a loan from traditional loans, this is when unsecured loans come handy. Most unsecured loans do not require any credit check. Even if your credit score is poor or bad, you can still apply for the loan but only at a higher interest rate than usual.
How much can you borrow?
Depending on the type of unsecured loan you apply for, you can borrow from as small as £50 up to a couple thousands of sterling pounds. Let’s take for instance payday loans. If you’re eligible to avail the loan, you can borrow from £100 up to £1,000 payable within 30 days or usually on your next payday. If you have good credit, you might be able to borrow more money than if you have a poor credit score.
How much do unsecured loans cost?
Interest rates for unsecured loans vary from deal to deal. Whichever type of unsecured loan you apply for, it is worth noting that your credit score vastly affects the cost of your loan. You can still avail a personal loan even with bad credit but expect that your interest rates will be higher. If you have a good credit score, however, you don’t only get to enjoy larger loan offers but said loans are also less expensive. This is why borrowers are highly encouraged to maintain a good credit score to enjoy advantages such as cheaper loan interest rates.
Where to apply for unsecured loans?
If you’re ready to apply for an unsecured loan, you can do so from banks, high street lenders and from online providers. Availability of loan will depend on which type of personal loan you opt for. If you’re applying for a payday loan, for example, then completing an online application form will work just fine. If you’re looking to avail a credit union loan, you may need to go directly to your credit union’s office. Small personal loans and credit cards, on one hand, are available from banks.