Why secured loans are better than unsecured ones?

It is currently easier than ever to get a loan, regardless if it is for personal use, for home-improvement, or meant to pay for a car. Lenders have dropped some of the requirements on their services in order to make them available to a wider range of people. However, the ease with which you can borrow money from lenders should not tempt you into making rash decisions. Deals that may appear to be great at the beginning may turn out to be too expensive and the other way around.

This is especially true when it comes to how most individuals decide if they should get a secured or unsecured loan. The majority of people tend to choose unsecured deals due to the fact that they involve less risk. When it comes to secured loans, if you cannot repay the money, the lender can take possession of your property. However, if the deal does not require collateral, then there is nothing to worry about, right?

Unfortunately, this is usually not the case. Unsecured loans can still do a lot of damage to your credit rating, which will affect the terms and conditions that you get in the future. In other words, taking out an unsecured loan and not repaying it, or always being late with the payments can make it impossible to borrow money in the future.

How are secured loans safer than they appear to be?

The short answer is that lenders will almost always rather get their money back than take possession of your property. Secured loans can have very high values and long terms. If anything ever happened and your income is reduced as a result, making it difficult to keep up with the monthly payments, the lenders will try to work with you in order to find a solution. They may allow you to refinance the deal and get a better interest rate. You may also ask for a term extension so that you will have to pay smaller amounts of money.

In any case, the lenders will first look for solutions and only take possession of your property as a last resort. Generally speaking, this makes secured loans almost as safe as unsecured ones, especially if you are willing to work with the lender in order to find a solution to the issue.

Why are secured loans better in the long run?

Secured loans have longer terms and come with a guarantee for the lender. This allows them to offer smaller interest rates, making the debt considerably cheaper than an unsecured loan. In the long run, getting a secured loan that has a low fixed interest rate will be a lot cheaper than an unsecured loan.

It is also important to mention the fact that you can borrow much more money using a secured loan than through one that does not require collateral. Furthermore, if you make the monthly payments on time and repay all the money that you’ve borrowed, taking out a secured loan can help increase your credit rating. This is due to the fact that it will show lenders that you can be trusted with large amounts of money and you are able to manage your personal finances in order to make the payments on time.

Make sure that you’re prepared for the commitment

Regardless of how many advantages a secured loan has when compared to an unsecured one, always make sure that you are prepared for the long-term commitment before submitting your request. The fact that they have such long terms means that secured loans should only be taken out if you have a moderate degree of financial stability.

Affordable Loan Options for the Unemployed in the UK

If you are unemployed, taking a loan can be a challenge. Many lenders prefer clients that have regular income to pay for their loan amortization. Recently, the lending industry requires the finance sector to not to extend loans to people who have no steady income, and these are the unemployed. However, unemployed residents of the UK can now borrow money from lenders that have the unemployed as their clients. To qualify for these types of loans, a borrower must be 18 years old or above, and he must be a resident of the UK. You must also have a bank account through which the lender can collect payment except for the doorstep loan in which all transactions happen face-to-face.

Borrowers with a bad credit history or no credit history at all can apply. If they pay their loan without missed or delayed payments, they could start building a good credit history. With a good credit record, borrowing money in the future would not be difficult.

How can the jobless pay them back? In the UK, even the unemployed have an income.  Here are several affordable loan options for the unemployed in the UK.

Guarantor Loans

Even if you are unemployed, you can take a guarantor loan of up to £12,000 that you can repay from 1 year to seven years. With someone to take responsibility for your loan if you cannot pay anymore, lenders are willing to grant you a credit. However, it is hard to find someone who would willingly help you get a loan. Asking your best friend, parents, siblings, or relatives to be the guarantor would give you a higher chance of finding a guarantor.

Homeowner Loan

Unemployed residents of the UK that own their home can apply for a homeowner loan. In this type of loan, you put up your house as security for the amount that you would borrow.  Because your home serves as your security, you can borrow between £25,000 and £250,000. With this type of loan, you could pay for significant expenses through a loan even if you are unemployed. However, you must pay back the amount that you borrowed plus interest rate or lose your home to the lender.

Payday Loan

A payday loan is usually for those with regular employment. Lenders would usually deduct the amount due for the mortgage every payday. In the UK, even the unemployed can get a payday loan. In this case, the lenders can collect payment every time the borrower receives the check for the borrower’s benefits from the government. You must show proof that the benefits that you receive can cover for your loan payment.

Doorstep Loan 

A doorstep loan is an old way of lending and borrowing money wherein the transaction is face to face. Borrowers may apply online, but the lender sends his people to visit the applicant in his home. The representative of the lending company explains the terms and conditions of the loan before letting the borrower sign the form. The agent gives the money to the borrower directly. The person would also visit the borrower to collect a payment, which is weekly. Doorstep lending is legal, and there is a governing body that regulates their operations, especially the interest rate and penalties.

If you are a resident of the UK, unemployment is not a hindrance to taking a loan. All UK citizens earn an income in the form of pension for retirees, unemployment benefit, child support, child care benefits, student finance for families with children in college, and disability support. As someone with an income, you are qualified to borrow money.