Unsecured Loans: The Lesser Known Sibling Of Secured Loans

What is man's greatest invention?

Some of the latest gizmos would immediately crop up in our minds as the most probable of the answers. But do these gizmos really deserve the veneration that they receive. True, they have revolutionized lives. But they have been characterized with impermanence. Another new invention and the earlier invention is nowhere to be seen.

One invention of man which has withstood the challenges of time is a home. The earlier users of home might have constructed it just for shelter purposes. But it has assumed new roles in a person's life. Besides providing shelter, it has become an indispensable status symbol. Home has continued adopting new fashions and styles, and thus still holds the same esteemed position that it held in the primitive ages.

People revere their houses, and would think twice before taking any step which imperils its existence. Since secured loans entail keeping home as collateral, most people who value their houses would dread taking the loan. A single default may lead to ones house being repossessed. And with this all dreams which the customer and his/ her spouse may have dreamt with their home as a scenic backdrop fades forever.

This single fact has led a large number of people, including those who do not have the luxury of homes, to look for different options, in spite of secured loans offering a much better rate of interest.

"All that is gold does not glitter; not all those that wander are lost". So said J.R.R.Tolkien, an English novelist and scholar. Going by the logic it would be unprofessional to not cater to the vast population who do not want to keep their homes to any kind of obligation, or who do not have a home in the first place, on the grounds that they can cause default in payments.

To fill up this vacuum and to cater to this vast population which was till yet unsatisfied or was debarred from the credit process at the very initial stages because of the absence of home, the concept of unsecured loans was launched.

So what is an unsecured loan? An Unsecured loan is a loan for those who do not take a secured loan. The lender provides the loan without having to keep any collateral. The loan provider in this case has more risk to bear. He doesn't have the cushion of home or property to meet the contingencies like constant default. So he would counter it through a higher rate of interest. But customers who desire to keep their homes safe will bear the high interest rate without flinching. The interest rates may be slightly higher than what is charged for secured loans. One doesn't have to rely on the high street lenders who charge a very high rate. There are many reputable lenders who may offer the most desired terms.

Unsecured loans are very fast in being approved. The lender doesn't need to value the worth of the customers' property, which is the most time consuming process. The result is fast cash for the customers to benefit from.

Since there is no collateral involved in the process, lenders would dread offering loans to those who have a bad credit history. The denial extends even to those who have received County Court Judgements or Individual Voluntary Agreements. But there are lenders who will happily take the risk; of course charging a higher rate of interest for their services.

Taking out an unsecured loan doesn't give one a license to default. The lender can take actions to make good his defaults. While in the case of secured loans the lender would have immediately covered the defaults through liquidation of the collateral; in unsecured loans they would have to take the help of the court, which ultimately results in repossession of the home.

Such court proceedings can result into the customer's name being entered on the defaulters list with the credit agencies for around 6 years. And in these 6 years a person won't be able to get loans as lenders perceive the customer as precarious or bound to default. This would certainly be a very complicated scenario since a person does need loan to meet contingencies.

To skip such a scenario one would have to be very cautious right from the time when one plans the loan. The following checklist would be of immense help:

Decide what amount you really require.
Select the lender.
Decide the amount to be repaid monthly.
Make an optimum balance between the ultimate cost of the loan and the monthly repayments.
Make an optimum balance between the amount of monthly repayments and their number.
Be regular in repayments.

With these points in place one can really enjoy the most out of the unsecured loan and rest assured as to the safety of his home.

Aditya has completed his masters in mass communications from Jamia University. If you need UK Personal secured and unsecured loans visit http://www.ukfinanceworld.co.uk

Paydirt: Student loan locator Minneapolis Star Tribune, MN - Jul 5, 2008 There is plenty of news this summer, from interest rate resets to loan providers exiting the market. By KARA McGUIRE, Star Tribune Paying for college is a ... Rates dropped July 1 on some student loans Cleveland Daily Banner Loans can fill gaps in college financing St. Louis Post-Dispatch Students can find aid, even at last minute Seattle Times all 11 news articles

CRDB issues 6.5bn/- for business loans DailyNewsOnline, United Republic of Tanzania - 4 hours ago THE CRDB Bank Limited has issued a loan of 6.5bn/- to small and medium scale financial institutions in Kilimanjaro region for the period spanning January ...

ADB earmarks $924M in loans to RP Inquirer.net, Philippines - 7 hours ago By Michelle Remo MANILA, Philippines--The Asian Development Bank, one of the country's biggest sources of foreign loans, is considering to lend $924 million ...

Homeowners suffer while mortgage bill sits in Senate San Diego Union Tribune, United States - 10 hours ago They knew what they were getting into when they took out their loans. Let 'em suffer for it.” First, not everyone did know what he or she was getting into. ... Arizona rate increases to peak in July Arizona Republic Fighting Foreclosure: One Family's Story Consumer Affairs As foreclosures rise, mortgage assistance tapers off Houston Chronicle all 6 news articles

Regulating Wall Street A window to a new world Economist, UK - Jul 3, 2008 Even Goldman Sachs, Wall Street’s sole surviving muscleman, sees the loan facility as systemically crucial. Though the amount borrowed has fallen to a daily ... Wall Street firms reduce, banks step up Fed loans The Associated Press Wall Street firms reduce borrowing The Associated Press all 180 news articles

Arizona law now requires loan officers to be licensed Arizona Republic, AZ - 20 hours ago At almost the end of the state's legislative session in the wee hours of the morning, lawmakers approved a bill that requires loan officers and mortgage ...

How an odd bipartisan alliance in '90s led to loan debacle Philadelphia Inquirer, PA - 18 hours ago By Joseph N. DiStefano The bad-home-loans mess that has slowed the US economy can be traced to a strange 1990s alliance of Democratic social engineers and ...

Case filed against ex-banker for giving Rs 6 cr loan to relatives Expressindia.com, India - 4 hours ago Kamla Kant Tripathi had disbursed these loans without verifying the credentials and financial status of the applicants and their guarantors. ...

When Credit Gets Tight, a 401(k) Loan Becomes Tempting New York Times, United States - Jul 5, 2008 He did not allow employees of Karsten Manufacturing, maker of Ping golf clubs, to take loans from 401(k)s. The response from normally placid retirement ...

FSA is too cautious over home loans, warn banks guardian.co.uk, UK - Jul 5, 2008 Britain's banks are becoming increasingly frustrated that the Financial Services Authority, keen to avoid a repeat of the Northern Rock fiasco, ...