Unsecured personal loans: Consumers bonanza this Christmas

Today, we live in a world surrounded by pop culture. Wherever we look, we are encouraged to buy more. Material possessions rule our lives. A recent survey by research company Mintel shows that UK residents are taking more and more money to purchase luxury items. In fact, by the end of this year, personal loans worth over £5 million will be taken out to pay for cosmetic surgery. According to Sainsbury Bank, a fifth of these loans i.e. £I million are taken out by men. We need money for almost everything in life. Whether it is for a new pair of Manalo Blahniks or a dinner at Four Seasons, Baby Phat couture or a new Jag, money rules our lives. And most often than not, these desires can’t be fulfilled by our monthly salary alone. Instead of being an anomaly, personal loans have become the norm of the day. Studies show that about 75 percent of UK residents have taken some kind of personal loan as a financial reprieve.

Unsecured loans are a good solution for immediate cash needs. Anyone can apply for it; be it a tenant, a student or even a homeowner. Easy to avail and convenient to repay, it is certainly the borrowers number one choice. From the customer’s point of view, it is a fast and risk-free option. As its name suggests, this loan can be obtained by loan seekers without placing any collateral. Unlike secured loan option, the borrower will not be laying aside his property or home against the loan offered to him. Therefore, there is no threat of eviction. Loans are provided on the basis of employment and salary proof or annual income. Loan amounts can range from £5000 to £25,000. Repayment period can extend from five to ten years. Fast approval and speedy process are some of the advantages that you can expect from an unsecured loan deal.

Although, this loan option is completely safe from the borrower’s point of view, it is a completely different ballgame for the lender. There is no physical proof in the form of collateral. So, there is no guarantee that the loan amount will be returned on time. Due to the hazardous nature of this loan, financial regulatory bodies like the FSA (Financial Services Authority) allow these lenders to charge a higher rate of interest. But this tiny hitch shouldn’t stop you from considering this loan option. Additionally, unsecured loan can also be availed by borrowers having a bad credit history.

Studies show that one in five people have credit problems, such as arrears, bad debts, late payments, IVAs, former bankruptcy and county court judgments. Whatever tickles our fancy, we need to have that as soon as possible. Instant gratification is the need of the hour; buy now and pay later is the mantra of this generation. Banks compound this error by plying you with loans beyond your means. This increasing dependence on plastic obviously affects one’s financial stability. Surveys show that at least 72 percent of the UK population has over dues against their names.

In the past, having a poor or adverse credit rating rendered it almost impossible to get a loan. However, more and more lenders have come to realise that bad credit isn't the end of the world and have developed a wide range of unsecured bad credit loans for people with stained financial records. Lenders are now prepared to provide bad credit unsecured loans to customers bearing bad credit history on some conditions. Unsecured bad credit personal loans will carry a little more in the form of interest rate than secured personal loans. Repayment terms are commonly spread from 6-10 years. The repayment term usually depends on the loan amount. As the name suggests, to avail a bad credit unsecured loan applicants need not place any kind of collateral with the lenders. Payback capability is determined through the borrower’s bank statements and employment documents. Thus, it is the loan seekers payback capacity that translates into a kind of surety.

Once approved, the lender may offer anything ranging from £5000 to £25,000. Loan seekers are warned beforehand that the interest rates may be slightly higher in comparison to other personal loans. This partly due to the risk involved from the lenders point of view. There are no restrictions as far as usage is concerned. It’s completely your call as to how to spend the money. As more and more people have credit problems and the demand for bad credit loans increase, interest rates are also likely to become more competitive than ever. Before applying to a particular lender, it is important to check your credit ratings. Any misrepresentation of facts may lead to lowering of credit ratings.

Generally, loan lenders rely on credit ratings to approve loans. The better your score, the better is your chance of getting good rates on your loan deals. Even three points lesser than your previous score may save you thousands of pounds in the long run. Fair Credit Reporting Act allows you to correct any irregularities in your credit record. Don’t try to be smart by providing false information. Once a loan application is received, it is the standard practice of the lender to check and verify your credit information.

There are many lending institutions that specialise in bad credit unsecured loans for homeowners and tenants. Many people are unaware that bad credit loans are a great way to rehabilitate your credit ratings. Just make sure that you are making the payments on time.

An online search is a good idea as it would give you a clue to the interest rates offered by different lenders. You can also use their loan calculators to find a loan amount suitable for you. Play around with numbers and repayment time; you are bound to come up with a loan option that fulfils your financial needs and doesn’t clean your pockets. Information technology has ensured that everything is right there at the click of a mouse. It is really up to the borrower how he uses the resources in his hands.