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There are several loans that do not require any security. These can be payday loans, instant loans, personal loans, etc. Even the credit card and store card debts fall in this category.
Unsecured loans involve a high rate of interest when compared to asset based lending. These loans are granted solely on the basis of the loan agreement and the capacity of the borrower to repay. Should the borrower fails, the lender would have to bear the brunt of loss.
Although legal remedies are available to lenders, but this involves a long process. In case of insolvency, most lenders refrain from this because even if they claim, their outstanding amount will be the last to get paid off. The borrower's assets are first used to pay the secured loans and mortgages. So, it means that lenders take significant risk while lending to those borrowers who do not provide any security. That is why the lenders charge high interest rates against unsecured loans.
On the other hand, unsecured loans are quite popular among the borrowers. A recent research by Alliance and Leicester revealed that unsecured loans are most availed by those who are in their early thirties. These people take loans for meeting their living expenses, shopping expenses, home improvements and for buying luxury items like cars, etc.
To get loan, you must be a UK resident and competent to enter into a contract. The loan agreement is nothing but a contract between you and the lender. You may be a homeowner or a tenant as both are eligible for unsecured loans. The utility of such loans can be judged by the fact that people in the UK take these loans for purposes like cosmetic surgery, shopping for regular store items, buying gas, etc.
The author is a business analyst currently assisting Longdog Finance, for
Unsecured Loan and he writes imperative articles on different products of
the organization.
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