Unsecured
loans

An unsecured loan is loan that won’t be secured against collateral such as a home or car. This is different from secured loans, where you put up collateral that might be seized if you fail to make payments on time. 

The lender may increase the interest rates and decrease the maximum loan amount for an unsecured loan. That’s because the lack of collateral makes it riskier for the lender. Also, you might have a higher chance of getting rejected when you choose an unsecured loan compared to a secured one.

The factors that determine your eligibility for an unsecured loan include:

• Your credit history and credit score.
• The borrowing terms and amount you want to borrow.
• The size of the monthly repayments and your personal income. 
• Other lender-specific criteria. 

Furthermore, you could improve your eligibility for an unsecured loan with a guarantor. This is usually a friend or family member who will take responsibility for paying back the loan if you cannot.

You can compare unsecured loans by considering several factors, which are as follows:

• Interest rate: The interest rate is the main fee you’ll pay for receiving a loan from a lender. Rates vary significantly on our platform based on factors like your credit score and could be anything from 12.9% APR to 1,625.5% APR. Aim for a lower interest rate to reduce the cost of the unsecured loan. 
• Other fees and charges: Read the terms and conditions of the loan agreement for hidden fees and charges. For example, if you plan to potentially pay back the loan early, consider the fee associated with this action.
• Loan terms: Consider various aspects of the loan terms, including the length of repayment. Choosing a longer repayment period results in lower monthly payments but could increase the overall amount of interest you pay for the loan.

To figure out if you can afford an unsecured loan, you need to evaluate your monthly expenses. Compare the amount of money available after living costs with the monthly repayments. Ideally, your monthly disposable income is more than enough to pay for the unsecured loan. 

However, if you’re having trouble affording the unsecured loan, you can borrow a smaller amount or increase the repayment period to reduce the size of monthly repayments. Also, it’s best to compare multiple unsecured loan lenders to find the best deal.

It’s important to consider the pros and cons of getting an unsecured loan before applying to decide if it’s the right choice for you in your financial situation. 

Pros:

• Avoid losing assets: Choosing an unsecured loan means you don’t need to put up collateral assets that could potentially be taken away from you. This reduces the stress of potentially losing your home, car, or other asset vital to your everyday life. 
• Improve credit score: An unsecured loan could potentially be an opportunity to increase your credit score by making the repayments on time. By improving your credit score, you could potentially qualify for better loan terms in the future. 
• Receive emergency cash: The money you receive could be used to pay for financial emergencies. This includes living costs, medical bills, car repairs, and more. 

Cons:

• Negatively affect credit score: If you are declined for an unsecured loan or fail to make repayments on time, then your credit score could be negatively affected. Therefore, you could get worse loan terms in the future and have a lower chance of successful loan applications. 
• Debt spiral: Failure to repay the loan can lead to fees and more interest payments. This could result in a debt spiral that’s difficult to escape.
• Higher interest rates: Lenders view unsecured loans as riskier, so they typically increase the interest rate. This means you’ll need to pay back more money for the same loan size than if you choose a secured loan.

Getting an unsecured loan could affect your credit score positively or negatively depending on several factors. Unsecured loans could affect your credit score positively if you make repayments on time for the duration of the loan. Therefore, it’s important to ensure you can afford the unsecured loan. 

However, getting an unsecured loan could negatively impact your credit score if you are rejected during the application process or fail to make repayments on time. Here at BadCredit.co.uk, we match borrowers with carefully selected loan lenders to increase probability of acceptance when compared to applying to an individual lender directly.

The number of unsecured loans you can have is not limited, but you need to make sure that you can repay all loans you take out. Also, lenders will evaluate your existing loans and take that into account during your unsecured loan application process. You may get rejected for additional loans if the lender believes your financial commitment to current loans is all you can handle. 

The cost of an unsecured loan depends on the interest rate charged by the lender. After the lender has concluded the credit check, they will determine the interest rate to charge. Note that interest rates for unsecured loans tend to be higher than secured ones since they carry more risk for the lender. 

To decrease the cost of an unsecured loan, you could improve your credit score, get a guarantor, and compare lenders. Taking the time to compare the offers of multiple lenders will help you find a deal matching requirements. 

Finally, be aware of the extra charges by reading the terms and conditions. Examples of extra fees include early payment fees if you want to pay off the loan earlier than the agreed-upon date.