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Loan Non Secured: Loan without any security, without any collateral.

All of us know that lending money is a form of business, which is in practice since thousands of years. In this business, if somebody needs money for any purpose and if he don’t have money of his own, he (the borrower) borrows from somebody else (the lender) for a certain duration. After completion of the mutually agreed duration, the borrower returns money to lender along with an extra amount which the lender charges due to his service of offering money to borrower when he was in need. Due to the increasing business complexity, there are lenders who ask the borrower to provide any of his property which will act as a security against the money borrowed by the borrower.

The collateral is taken to reduce the risk of defaults by the borrower. This property, which is called collateral, is returned to borrower when the borrower returns the money to the lender according to agreed terms. However, there are lenders who provide loan to borrower without taking any of his property as security against loan offered to him. In this case, the lender evaluates the borrower’s profile in terms of his income level, length of service, previous credit record, record of timely payments etc, based on which the lender decides the loan amount to be offered to this borrower and the rate of interest to be charged.

However, lender’s decision is just a perception since no body knows others mind. Now, since no property is offered as security against loan offered by the lender to the borrower, such loans are comparatively more risky for lenders. In case of defaults by borrowers, the only option left with the lenders is the initiative legal proceedings which involve time, money and efforts. Whereas, in case of secured loans, borrowers know that in case of defaults, lender would auction the property to recover their loss. So, there is less chance of defaults.

Now, to compensate the increased risk in offering unsecured loans, such lenders charge a little higher rate of interest. Similarly, the loan amount is less compared to a secured loan. However, both the loan amount and interest rate to be charged are based on borrower’s profile, income level, number of years in current job, record of consistent payments, of record of defaults, infact the complete credit history is taken into account. However, in case of unsecured loans, if the borrower maintains consistent and timely record of payment, lenders often reduce the rate of interest.

Key Criteria/ Preferred Profile for Unsecured Loan is as follows:

1. You have a full-time job
2. You are in the current job for more than a year.
3. You are residing at the current address for more than a year
4. You have your own UK bank account
5. You have a savings account to which you make regular payments
6. You have NO CCJ's, rent arrears or bankruptcy history
7. If You have a credit/store card or any other bill to show record of timely payment, it will boost your chance of getting higher loan amount and lower interest rate to be charged

Key Features of an Unsecured Loan:

1. Cash generated through a Non Secured Loan can be used for any purpose - for example, debt consolidation, home improvements, buying a car or going on holiday
2. It can also be used for debt consolidation which effectively means that you have to make on single payment every month instead of several payments on several due dates.
3. Repayment duration is flexible and can be decided mutually between 3 and 25 years
4. Minimum documentation and fast processing

If you are not a homeowner and have no asset to offer as security, you still have an option to borrow money. This option is called non-secured loan which can be borrowed without offering your property or any other asset in the form of collateral.