The finance industry uses the term personal loans rather vaguely at times. Personal loans are what you may expect. They are loans taken out for personal reasons, so are different to business loans, car finance loans or other sorts of lending. A £1000 unsecured loan is one of many options for borrowers.
You can take out personal loans which are either secured or unsecured. You can spend both of these types of personal loan as you desire. There are various types of secured and unsecured personal loans available, so Moolr has taken a look at the different varieties on the market.
Secured Loans and Unsecured Loans
Secured loans are ‘secured’ against an asset, such as a home, or a vehicle. This means that if you don’t keep up with repayments on a secured loan, that asset can then be at risk. These are a type of loan that lenders like.
The first and most obvious reason is that the lender is guaranteed to get their money back. In the event that the borrower cannot or will not repay the loan, the lender can take the asset which the loan was secured upon. This is in order to recover funds. That’s bad for the borrower as they could lose their home or car. It is good for the lender who won’t be taking any risks by lending money to them. The secured asset may even be worth much more than the money owed.
Other Reasons
The second reason why many lenders like secured loans is because with secured loans they can provide customers with more attractive deals. They are attractive as they come with lower interest rates and preferential payment periods. This makes the products more appealing and more popular. Secured lenders can offer better deals to their customer due to the reduced risk of borrowers defaulting on payments. People tend to take secured loans far more seriously and make repayments in full and on time. They can be less reliable when it comes to unsecured loans.
Unsecured Personal Loans
Like secured loans, unsecured loans can be used for any purchases. But unlike their secured counterparts, unsecured loans are not secured against a property or other assets. So, in principle there’s no risk of a borrower losing their home.
However, in practice people can still lose their homes with unsecured loans too. This is due to widely used fine print called ‘Charging Orders’. Charging Orders allow lenders to reclaim unpaid debts on unsecured loans by forcing the sale of any assets which a defaulting borrower owns.
Lack Of Assets
Generally, people borrowing money as an unsecured personal loan might not have any assets at all such as a car or house. Therefore, in these cases people who default will still be taken to court if they refuse to repay their loans. This is still the case even if Charging Orders won’t affect them. This is because the lenders will still need to get back the money they lent.
If you find yourself defaulting on an unsecured loan you should still take the matter very seriously and try to reach agreements on when and how you will repay your debts. You can also get debt advice from a number of reputable organisations.
Unsecured loans – Banks and other Lenders
Finding the right unsecured loan can be a fairly intimidating process. Lenders present a wide range of products to choose from. They offer varying loan types, amounts, rates of interest, fees and conditions. Many people discover that they are unable to obtain from a High Street Bank. Therefore they look for alternative solutions. Moolr offer one such solution. We have Brought together panel of lenders which can offer an alternative answer when it comes to a £1000 unsecured loan, plus a wealth of other finance options.