When it comes to unsecured loans in the United Kingdom, there are a large variety available to choose from. These products are becoming more and more popular, especially as they can be secured, even if you have a bad credit score, and in some cases, are blacklisted.
Their popularity stems from the fact that you need no form of collateral to secure a loan – unless it is a logbook loan. This uses your vehicle as collateral, but you will still be able to drive it on a daily basis. Unsecured loan applications are also extremely fast and should you be successful, the agreed upon loan fee is paid into your bank account in a matter of hours.
What type of unsecured loans are available in the United Kingdom? In this article, we will take a look at a few options that you can compare should you need cash in a hurry.
Peer-to-peer loan products
This type of loan completely cuts out a financial institution or bank. Here you borrow from a lender with no middleman involved. A word of warning, many peer-to-peer lenders have varying interest rates and repayment options. Before signing for any loan, read the contract fully, including the fine print.
These are often an outlet for people with bad credit scores who need to secure a sum of money. Here, you agree to pay back the borrowed amount once you receive your next paycheck. Again, interest rates with these loans can be fairly high, sometimes close to 1000% APR. Missed payments also result in high penalty fees.
Here a borrower agrees on a set some of money with a lending institution. This is then repaid over a period, for instance, 24 months, along with the interest accrued.
This is very similar to an instalment loan but here the lender will ask for someone to act as a guarantor for the loan. What does this mean? Well, should the applicant not be able to repay their loan, the guarantor will be expected to pay it. This provides an extra level of security for the lender, and can be offered to people with a bad credit history as a form of loan product. Because of the guarantor, interest rates and monthly repayments are often cheaper.
Logbook loans are given to applicants who own a motor vehicle, truck or motorcycle. Here the vehicle itself acts as collateral should the person stop making their monthly repayments. Should this happen, the lender, who legally owns the vehicle for the duration of the loan, may repossess it. The loan amount depends on the condition of the vehicle as well as the mileage. The vehicle must be comprehensively insured throughout the loan period.