Unsecured loans: No home required

There are few loans that are as versatile and wide serving as unsecured loans. Catering to a wide section of society and imposing minimum of conditions, these loans are highly popular among the borrowers. These loans may have been specifically designed for the tenants but now these are equally popular and desired by the homeowner community.

All people are not comfortable in pledging their homes so as to get a loan. This holds good especially when the financial requirement is moderate. Anyone who needs a small loan would not like his home to be collateralised. Unsecured loans take over such people with ease. These loans can provide you up to £25,000 and you can conveniently repay the loan amount in monthly instalments that may extend up to 8-10 years. All this is offered to you without asking you to pledge your home. Thus, you can meet most of your financial requirements with these loans.

Some times you want a loan quickly. In such circumstances, going through the long procedures may not be desirable. Even if you have a home, you would like to go the shorter way – the reason why unsecured loans are so popular. In the absence of any security, unsecured loans quicken the loan process. A borrower escapes many formalities that are otherwise associated with loans that require you to pledge your home.

Unsecured loans are available for many purposes. If you have multiple debts in the form of store card and credit card bills, you can take out an unsecured debt consolidation loan and use the proceeds to pay off your pending bills. The credit card and store card companies charge very high interest rates from the consumers. Therefore, this method of consolidating the debts is quite beneficial. Besides, there are other benefits like it will help you in simplifying your finances. With one lender in place, you will also find it easier to manage your debts.

Other applications of unsecured loans include buying a car, undergoing cosmetic surgery, carrying out home repairs, holidaying, education, paying your tax bills, etc. These loans are sanctioned on the basis of your monthly income, your credit score and the repayment capability. As already discussed, your residential status is irrelevant here. It is important to understand debt to income (DTI) ratio and how it works against you or in favour of you.

DTI ratio is always expressed in percentage. Your total monthly income is divided by the total monthly loan repayments and then expressed in percentage points. If this percentage is less than 20, it is considered as very good. It shows that you have sound repayment capability and you can take out more loans. The more the DTI ratio, the more difficult it gets to take a loan. Lenders hardly provide loans when your DTI touches 50 percent.

Various statistics shows that a very large number of people are missing out on repayments. Borrowers think that there is not much at stake in case of unsecured loans and, therefore, they can afford to miss the repayments. But, this thinking stems out of ignorance. You may end up in damaging your credit rating and may also invite legal action. The solution is not in missing the repayments but in managing your finances. Take out only that much loan that you can comfortably repay within your own resources.

A lot of lenders in the UK are offering unsecured loans. They have different loan plans to suit differently situated people. A borrower who has a huge monthly income and good DTI ratio may be able to get a cheap loan deal than others who don’t have the matching strengths. Therefore, if you want a good deal, just shop around and negotiate with the lender on the basis of your strengths.

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