Unsecured Loans UK: Is Your Credit Score Good Enough?

2007-03-08 10:33:40

( Financial )



Despite aggressive push by loan providers, unsecured loans UK are not for everyone. Not all who apply for unsecured loans UK is accepted or is given the headline annual percentage rate (APR). In giving out unsecured loans UK, lenders’ main concern is your creditworthiness since your loan is not supported by any collateral.

To be able to avail of unsecured loans UK, you have to have a high credit rating. A high credit rating gives lenders assurance that you will be able to repay your loan. Lenders perform statistical credit scoring, which is based on several factors such as credit payment history, outstanding debts, credit type mix, etc., on their applicant-borrowers.

The result of the credit scoring will allow lenders to determine whether to give out the unsecured loans UK to you and the annual percentage rate (APR) which will be charged to your loan.

If in case you are not eligible for unsecured loans UK, lenders offer in their stead secured loans. Secured loans are loans that are backed up by collaterals like your properties. Lenders can take possession of your properties in case of non-payment.

The term of secured loans is longer than that of unsecured. However, the longer the term of your secured loans, the higher is the APR of your loans.

Secured loan rates can either be fixed or variable. With fixed-rate secured loans, your APR and monthly payments remain static over the life of the loan. The disadvantage of having fixed-term secured loans is that you are pegged to your APR even if interest rate is declining. On the other hand, you get a good deal in a scenario of rising interest rates.

Adjustable-rate unsecured loans are those whose APR fluctuates depending on market conditions. Usually, with adjustable-rate loans, you start with low initial payments, but these can increase over time.

To get the best secured loan, however, don’t just look at the APR. There are other costs to credit such as application fee and early termination fee. Consider all these if you want to get the best secured loan deal. Shop around and compare. The good news is that there are available websites that can help you compare options being offered by a number of lenders.

Put in mind that putting in the extra effort of shopping for the best loan deal before signing the credit document can save you a lot of hard-earned money.


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