Financial jargon can feel like it’s hard to get your head around at times. With so many acronyms, abbreviations and even the odd bit of Latin, it can be difficult to fully understand what you’re getting into. The pace of annual customer credit growth was 9.9% last month, and some experts are concerned that consumers don’t properly understand debts such as credit cards, overdrafts and unsecured loans.
However, help is at hand. In this post, we’ll discuss everything that you need to know about unsecured loans.
What is an Unsecured Loan?
An unsecured loan is different to a secured loan and is often known as a personal loan. Whereas with a secured loan, you need to secure the loan against an asset (such as your house), this isn’t necessary with an unsecured loan.
Instead, you borrow the money from a lender, such as Likely Loans, and make regular and fixed monthly repayments until it is repaid in full. If you fail to make the payments, you will incur additional charges that may damage your credit rating.
If you fail to repay the money in full as per the agreement, then your lender also has the right to take you to court to get their money back.
The Pros of Unsecured Loans
With an unsecured loan, you’ll be able to borrow more than you would with a credit card. Plus, because your loan repayment is for a fixed amount each calendar month, it can be easier for you to budget.
In addition to this, you can usually determine the repayment length yourself. Although this will also dictate how much you pay in interest, it can also be used to help make your repayments more affordable over a longer term.
Finally, most provider also allow you to overpayments on a loan without penalty.
The Cons of Unsecured Loans
Generally speaking (and depending on your exact circumstances), unsecured loans have a higher interest rate than other forms of borrowing. Plus, you may end up borrowing more than you need to in order to meet lending criteria.
In addition to this, it’s important to note that you may not get the interest rate advertised, so you should read the terms closely after you’ve applied to ensure that you know exactly what you’re signing up for. This is especially true if you have a bad credit rating, so you should get a quote before you buy (but make sure that this doesn’t impact on your credit rating).
To conclude, there are a number of positives and negatives to unsecured loans. Whether an unsecured loan is right for you is largely based on your personal circumstances. So, do as much research as possible and, if in doubt, seek impartial advice.