Unsecured loans can be availed without the need for the borrower to put up any collateral as security. These loans are short-term in nature and can meet several needs. Also, unsecured loans are less restrictive and can be availed by both homeowners and tenants. Homeowners who do not want to put collateral to avail loans can go for these loans. Tenants and non-homeowners have no other option but to procure these loans.
Unsecured personal loans come with a range of benefits. The first obvious advantage is that there is no risk of collateral repossession in case of a repayment default. Secondly, these loans can be procured in quicker time in comparison to secured loans, as collateral valuation is absent in this case. The one slight drawback is that the interest rates are higher with these loans. Lenders tend to do this as a way of keeping a margin against potential defaults from the borrowers.
Still, this should not be taken as a leeway to default. There is always the option of the Charging Order that lenders resort to. Through a charging order, the borrower (if he loses the case) is forced to put something of value as collateral against the loan amount. The lender can sell off that collateral to recover the loan amount. However, lenders do not want to go through the hassles of court proceedings, and there is no real guarantee that the court will rule in their favour.
The money from an unsecured loan can be used to meet several purposes, like funding a holiday vacation, paying educational expenses, consolidating debts etc.
Unsecured personal loans can be availed from a wide variety of avenues, like building societies, banks, private lenders and the Internet. The online option is the best in terms of choice and expediency. However, borrowers should always borrow from the right lender. That is, of course, easier said than done; but with proper research and comparison analysis, it is possible to get loans with the right terms and conditions.
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