Unsecured loans, tips to consider

Many of us at some stage in our lives will need to borrow money. Be it an unforeseen emergency or an unexpected change in circumstance, it is highly likely that the majority of us will come into contact with the lending industry. Interestingly, most people still use a credit card for so called luxury purchases, a new sofa or holiday for example, when in reality an unsecured loan may be the better option. So what is there to consider?

Every application begins with your credit score. For those with the highest scores, then the options are plenty, and often include the very best advertised headline rates. For those with a lower credit score however, the situation is somewhat different. You are most likely to be offered a rate that reflects how risky the lender thinks you are, often based on your current credit score and credit history, so the options will be limited. So the lower your credit score, the higher the rate of interest will be if you are offered any unsecured loan. Sometimes, you may not be eligible at all, and so the options decrease further. If you are a homeowner, then you could always look into a secured loan, but obviously if you fail to keep up repayments your home could be at risk.

Next, consider your own personal financial circumstances and the reason that you wish to borrow. Is it absolutely necessary, could you perhaps save a bit first? If you are in a poor financial state, then additional borrowing in reality is not going to help. Use the free debt charities to help you plan the best way forward.

Research does help immensely when considering an unsecured loan as there are so many products now available, for all circumstances, so it may be worth doing an online comparison before you apply. All credit applications that you make are noted on your credit file, so don’t keep applying for numerous loans as it will not help your credit score. A comparison type tool will also produce a list of lenders that may be willing to lend, indeed some offer soft searches so you can get a more concrete idea before you officially apply.

Should you be successful in obtaining an unsecured loan, always check the paperwork before you sign. Make sure that you understand and can afford the repayments, plus check for any additional fees and charges should your financial circumstances change.