In order to qualify for an unsecured loan on good terms, you will definitely need:
- A very good credit rating
- Credit reporting from bureaus like Equifax or Experian
- Proof of stable income/s
If you can fulfill all these “conditions”, then you are most probably eligible to receive an unsecured loan. Usually, reasons for which one applies for an unsecured loan are varied, but some of the most common include:
- For the purpose of debt consolidation – you have more outstanding debts, implying that you must meet several deadlines a month, having to pay different interest rates. A debt consolidation loan will make it much easier, and you will have only one payment per month (a larger sum), and only one kind of interest rate. This way you can save money and time definitely
- Home improvements- you can contract an unsecured loan in order to make home improvements. This is a very good investment always, because it will raise the value of your home on the market. Depending on how much you actually spend for this, it means that if you wish to sell your home eventually, you will receive more money on it.
As seen, there are ways to spend your loan wisely, meaning that you invest that money for a good cause. Certainly, you can do this unless there pops up some other emergency you need the money for (medical payments for example). With an unsecured loan, you will certainly have access to a much smaller amount than with a secured loan. This is why you should have a very good reason for contracting unsecured loans, because the money coming from smaller personal loans are usually spent quickly. Ideally, you would look for a loan which offers fixed rates, so that you can better organize your finances, and there will be no unexpected raise in interest payments.
Let’s take a loan of £10,000, with a term of 60 months (5 years) and with an APR of 7.9%. This is perhaps a loan on good terms, as it will have you paying an amount of £200.99/month, while the total cost of the loan is £12.059. As the APR raise, so does the total cost of your loan: taking the same values as above, only with an APR of 8.1%, this type of loan will have you paying around £201, while the total cost is £12.112. You will note that there is slightly a difference between the two; indeed, but make your calculations with the same amount and terms only with an APR of 10% or even more. That will definitely cost you a lot more.
If you are struggling with a bad credit record, contracting an unsecured loan might be very hard. Firstly, it is not easy to find a lender that will actually give you such a loan, given your bad credit history. Secondly, even if you are eligible, you will receive an unsecured loan for bad credit user, which means there will be an outrageously high interest you will pay and also the amount you may receive will usually be small.
