There was a time when getting credit support without having anything substantial to pledge was virtually impossible. Back then lending was not a competitive business. And, when one had to enter the loan market, the first thing that used to bother him was the security factor. Basically, property ownership was all that mattered.
But, the realisation of the fact that pledging collateral is neither possible for all (tenants, students and people living with their parents) nor it is always feasible for those who can (homeowners and property owners) – lead to the introduction of a loan alternative that does not involve collateral –unsecured loans – a sub-type of personal loans.
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In nutshell, the unique 'no collateral' feature of unsecured loans makes it suitable for all UK residents who are over 18 years of age and are incapable or unwilling to pledge collateral. However, the approval of the loan application is subject to the lender’s credit policy and the loan seeker's past and current credit standing as good or average or bad, and future payback capacity.
Other advantages of availing unsecured loans are no time-consuming property evaluation procedure, less paperwork, quick loan approval and no repossession threat (in case the borrower fails to payback). As they are not the safest deals for the creditors, cons are bound to be there – limited credit range (typically between £500 and 25,000), high interest rates (typically between 7.9% and 41%), fixed rate plan and payback option, and pre-set loan terms and conditions.
The importance of collateral is still unbeatable in the loan bazaar. But, creditors are making equal effort to target non-property owners. Market report shows that the demand for unsecured loans has increased in the last couple of years, which can be attributed to:The growing realisation that they are much cheaper than other credit alternatives like payment cards and overdrafts The fact that its 'no collateral' feature reduces the overall official procedures and the loan approval time
Because of the growing demand and competition, many creditors are even offering cheap unsecured loans [http://www.go4ukloans.co.uk/Cheapunsecuredloan.html].
However, to get cheap unsecured loans, the borrower needs to have a good credit history (past two years) and sound payback ability.
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