Loans can work in your favor

Jul 20
07:56

2011

Hina Khan

Hina Khan

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An unsecured loan is a loan you obtain without collateral. There are multiple advantages associated with this type of loan, but also some disadvantages.

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Applying and obtaining the loan is pretty simple takes very little time. A lot of different kinds of applicants are accepted by lenders for this type of loan: fully-employed,Loans can work in your favor Articles part-time employed or even unemployed, homeowners or tenants. Also, you have the freedom to use the money in any way you wish. However, since you have no collateral on the loan, the interest rates are usually higher then those on secured loans and the sum of money you can get is generally limited to £5,000 or £10,000 pounds.

Advantages and disadvantages of an unsecured loan

If you need some cash fast, this type of loan can help you a lot. Most lenders approve the loan in a matter of days. If you have bad or no credit history, such a loan it's a good way to build good credit history and obtain better interest rates in the future. Also, unsecured loans can help with debt management. If you have a lot of credit card debts with very high interest rates, the best strategy is to get a loan that comes with better interest rates and to fully pay your credit card debt. When applying this strategy, a secured loan or a remortgage is the best idea. However, not all people have those possibilities. If you are a tenant or a homeowner who can't remortgage, usually any type of unsecured loan will have better interest rates than your credit car. A plus too is that the loan is not related in any way to your home, which means that, if you experience financial difficulties, your home will be safe. Another major advantage is that most of the loans come with fixed interest rates for the entire repayment period, offering peace of mind over repayments.

But this type of loan also has some disadvantages. Since there is no collateral, the lender will give you money based on your credit history. If you have poor credit history, you'll likely have a high interest rate. This loan is a great solution for times when you need some cash fast but you should only apply for one only if you are certain you'll be able to cover for the monthly repayments. Piling up debt will complicate your financial situation.

Find help with debt management

If you are experiencing financial difficulties, getting professional advice is a good idea. The first step for clarifying your financial situation is to make a list of all your debts and to analyse the interest rates you are paying for them. If possible, try to obtain a new, cheaper loan and cover for the old debts. When you can't find the right solution on your own, you can ask for help from Debt consolidation advisors. They can provide you the whole range of solutions to consolidate your debt: individual voluntary arrangements, debt management plans or even bankruptcy and all about it.