Are Banks the Best Option for Unsecured Personal Loans?
Unsecured personal loan are increasingly in demand today due to various reasons. It has attracted borrowers in the present times
widely in the UK market because it makes money readily available to the borrower. The availability of easy cash finds ready application with borrowers for purposes like a holiday expenditure, sudden financial need when the borrower has already exhausted the credit facility of his account, and many more.
These loans are given by lenders like banks, building societies, etc. They vary from lender to lender in their format, term and purpose of the loan. For instance, Loan related to holiday and traveling may have 12 0r 24 months term. The lending amount can vary between £500 and £25,000. The unsecured loans bear an annual percentage rate which is supposed to be paid by the borrower. This is charged by the lender as a fee for making the money available in a liquid format for the borrower. The annual percentage rate varies among lenders. As a smart borrower, you are advised by the experts in the area to have a comparative picture of the annual percentage rates of different lenders before taking the loan. A fixed interest rate remains the same throughout the length of loan, regardless of any changes in the bank base rate. If the rate offered is a variable rate, it may rise or fall in line with any changes the Bank of England makes to the base rate during the term of loan. There is a choice between fixed and variable rate which is to be determined when the loan is made available.
Various websites provide information regarding a comparative analysis of the rate of interests available in the market. These days, unsecured personal loan is very much in demand among the borrowers. Tenants and students are most likely to take the benefit of such loans because no collateral is needed to be furnished in order to avail the loan amount. The ease of availability further adds to the advantages of such a loan. A sudden financial urgency may not be worthwhile risking your priced asset against the loan. Here, unsecured loan comes to the rescue of the borrower.
When lenders quote their annual percentage rates, they will state whether these are “typical” or whether they are set at one rate for all successful applicants, regardless of the risk they present. The typical rate is a rate that is offered to over 55% of successful applicants at the time. The exact rate will depend on the personal circumstances of the borrower. As regards the repayment, some lenders make early repayment, if desirable, comfortable to the borrower while others lay a penalty for early repayment. The penalty is to compensate for the loss in interest earnings of the lender. Since unsecured loan carries a higher rate of interest than secured loan, they are of particular significance to the lender as well. This is a risky investment for the lender and a high rate of interest is charged thereby. Lenders will check the credit history of the borrower to make sure a good risk.
Considering the present world of financial dominance, falling interest rates and competition among lenders have made personal loans very cost-effective. However, it has been seen that banks are unlikely to offer the most competitive rates in the market. A better idea is to research the market for good before knocking the bank’s door!