What Type of Unsecured Loan is Right for you?    

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Unsecured Personal loans are a financial facility that helps you with a lump sum to meet your needs. With these loans, you can pay debts, finance home repairs, pay rent deposits, etc. As these are unsecured or no-collateral attached loans, individuals prefer them highly.

However, there exist multiple types of unsecured loans in the UK premises.  For example, payday loans, no guarantor loans, debt consolidation loans, etc., serve different purposes. Thus, to benefit from an unsecured loan, you must choose the right for your needs.

For example, a debt consolidation loan is ideal for settling a whopping debt and reducing liabilities. It also helps you lower your interest and loan costs.  Individuals struggling with debt management and seeking swift solutions may benefit from these loans.

Similarly, you must analyse your needs, loan purpose, amount and nature before choosing. The blog lists some popular unsecured loans to tap for different life situations and cash needs.

What is the basic qualification for unsecured loans?

The loan qualification criteria for unsecured loans may vary according to the loan type you need. Some loans require just regular income for approval while some may require a personal guarantee. This is because most individuals seeking an unsecured loan have low credit scores. In this case, the loan provider analyses or prefers income as the prime loan assessment criteria.

Individuals with stable financial management and loan requirements within budget may qualify. Alternatively, individuals with low income and credit scores must provide additional proof of affordability. For example, individuals seeking more than £10000 may require a guarantor.  It is especially true if the income is low with a compromised credit rating. Precisely, you may get unsecured loans from a direct lender if:

  • You have an income exceeding £5000 as a UK citizen
  • You meet the additional eligibility criteria (it differs according to loan and provider)
  • You have a regular bank account with a direct debit
  • You can repay the loan comfortably within the term
  • You can provide a suitable affordability proof

6 Unsecured loans and purposes you can use them for

An unsecured loan shares fixed interest rates and terms. However, you can seek variable rates. It depends on the income and comfort. Fixed interest rates help you budget well for the payments. However, with variable rates, you may benefit if the economy improves. It helps reduce loan costs drastically.

Here are some unsecured loans and the purposes you can use them for. It will help you choose the right one according to your needs:

1)     No guarantor loans

A loan without a guarantor is for individuals seeking independent financial solutions. A guarantor is a known one who helps the borrower qualify a loan quickly with a better interest. No guarantor loans are ideal for individuals with low income and credit history. However, if earning well and need quick cash, tap this. You can get up to £10000 for any purpose with a repayment capability of 12 months.

  • Ideal for tenants, students, housewives, and self-employed seeking a loan without a third-person guarantee.
  • Purpose:  emergency cash needs or short-term needs
  • Single parent loans

As evident, single-parent loans are for separated parents with child responsibilities. Meeting requirements after divorce becomes challenging. You may require constant cash support for personal or child-related needs. Here, you may get up to £20000 by meeting the basic requirements. Additionally, the account balance must be above £500.

Ideal for: divorced mom or dad with a kid

Purposes:

  • Finance bills and basic living costs
  • Meet the child’s educational requirements – stationery costs
  • Finance child’s vaccination or other medical needs

3)     12 months loans

12-month loans are unsecured personal loans that help individuals with short and medium-term needs. Just like, other loans, you need to prove income to qualify. Individuals with part-time/regular/ tax assessments may qualify.

Ideal for:

  • individuals with low income who want to spread the costs of the loan.
  • Need to lower the monthly instalment amount
  • Pay a whopping amount without saving

Purposes :

  • Consolidate multiple debts
  • Motorbike repair
  • Business-related purposes
  • Pay the mortgage amount without saving
  • Installment loans

An instalment loan is a lump sum that one gets at fixed interest rates. It is generally a long-term loan that one must pay with regular and fixed monthly payments. Each payment on an instalment loan is a repayment of a portion of the principal amount and interest costs. It usually grants flexibility to individuals to make the loan much more manageable.

You may seek instalment loans in the UK hemisphere if:

  • You have high monthly liabilities
  • You have a low monthly income
  • You want to split the loan costs and pay in 12-60 months
  • You would prefer a fixed-interest loan that is easy to budget for

Purposes you can use it for:

  • Update home with necessary repairs
  • Purchase car
  • Finance insurance premium costs
  • Purchase business equipment or clear payrolls
  • Loans for the unemployed

Unemployment presents multiple challenges that are hard to counter. For example, rent, utilities, subscriptions and energy costs require regular payments. Unemployment hinders the pattern and affects lifestyle.

If you are unemployed with some basic part-time income, check unemployed loans. These loans may help you with short-term cash assistance of up to £5000. However, you may get up to £15000 by providing additional income, a guarantor or collateral. By using any of these, you can reduce the interest liabilities or costs.

Who are loans for the unemployed ideal for?

Apart from unemployment, here are other factors that make the loan suitable for you:

  • Earn less than £5000 as monthly income
  • Genuine reason for unemployment or taking a break
  • Depend highly on government grants, unemployment benefits and part-time income
  • Need quick cash without a regular income
  • Lack of any other way to finance the situation
  • Can provide a guarantor or collateral for high funds

Purposes you can use it for:

  • Pay the rental dues
  • Start Business
  • Close important debts with consolidation
  • Pay for utility bills
  • Finance grocery bills or urgent home repair
  • Settle emergencies

6)     Bad credit unsecured loans

It is for individuals with low, no or poor credit scores. Individuals with issues like CCJ, Bankruptcy, late payments, missed payments, and penalties may apply. Individuals with poor credit history struggle to get loan approval. This is because lenders consider the person’s profile as risky. However, with bad credit loans, you share higher chances of approval than on other loans.

Who should consider bad credit loans?

  • Individuals with over 7 or more pending debts
  • Need an instant loan despite a low credit history
  • Require affordable interest rates despite poor credit rating
  • Have a good income but no credit score
  • Can provide a guarantor/collateral/personal guarantee if required

Purposes you can use the loan for:

  • Settle credit card debts with debt consolidation
  • Purchase a car on finance
  • Improve home with instant cash assistance
  • Close a small business requirement
  • Build credit with a suitable loan

Bottom line

These are some popular unsecured loans that you can use accordingly. The best part is, that these loans do not require collateral. Analyse the purpose, the eligibility criteria and document requirements before applying. After finalising the loan, compare the best loan quotes. It will help you choose the affordable one to fund your needs.

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