A loan not secured by an underlying asset or collateral is an unsecured debt. This implies that the borrower is free from the risk of repossession of the asset by the lending institution. But, as it is said, there is nothing like free lunch on this earth. Every offer comes with terms and conditions. In case of unsecured loans, the rate of interest charged by the borrower is much higher than that on secured loans. In fact, the difference between the two is enormous. At present, the current APR on secured loans starts from 6.2% and that on unsecured loans is from 13%. And the base rate decided by the Bank of England is 5.25%. So, that explains all.
Still, as the UK loan market trends reveal, borrowers prefer to pay more APR on unsecured debts than pledge their home as security. There are many reasons as to why borrowers prefer fast unsecured loans to secured ones, which usually require prolonged procedures. Some of them are cited below.
Fast processing of loan- Loans that don't require any security are quick unsecured loans. They take less time in processing and approval as well. In case of secured loans, it generally takes around two to three months for the loan money to actually get transferred to the borrower's account. So, when in need of quick cash, apply for unsecured personal loans.
No risk of repossession- The major drive that forces Brits to go for unsecured loans. A secured loan would put collateral against the value of a loan, guaranteeing that the borrower's home, car, or any other asset will be handed over to the creditor, in the case of default. If one seeks a fast unsecured loan, property is not attached to the value of the loan. This relieves the borrower's mind from tension and uncertainty.
Most Britons already in debts- Latest study by one of the leading financial websites reveal that most Britons are in debt from head to toe. This also refers to the increase in personal insolvencies that multiplied extensively last year. So, most Britons either have lost their homes due to defaults on their secured loans, or already incurred so many debts against their homes that they are left with no equity in their homes.
There are many other factors that incline borrowers towards quick unsecured loans, less and easy documentation is another one. Then, there is no need of property evaluation and other related legal formalities. So, apply for unsecured personal loans when your financial requirements are immediate and short-term.
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