The rising cost of living and changing business trends have made UK unsecured loans an integral part of our lives. Almost everyone is taking these loans on a daily basis in the form of credit cards, charge cards, store cards, overdrafts, etc. A credit option that can be availed on a daily basis would obviously not involve collateral, as asset evaluation procedures are quite time-consuming.

The main feature of unsecured loans - the above mentioned and the formally applied loans - is no collateral. Hence, these loans are ideal for:



Tenants, as they may not have something valuable to pledge
Homeowners, as they may not be willing to risk their asset


Other main features of unsecured loans are less paperwork and speedy approval, as lengthy property evaluation routines are not a part of this loan alternative. Popularly called fast loans, these loans are ideal for:


Urgent needs, i.e., when time matters
Temporary and small monetary needs, i.e., when security is not required


Non-existence of collateral condition means no immediate risks, i.e., in the event of repeated defaults - accidental, circumstantial, or intentional - the lender cannot take over the borrower’s valuables. Approaching Count Courts is the only way to deal with an unsecured loan defaulter. To avoid a CCJ (County Court Judgement), borrowers should always pay their EMI’s as decided.
Risk factors are high in unsecured deals. Hence, lenders usually impose high APR’s, and virtually fixed payback terms and loan conditions. Generally, an unsecured deal has:


An amount range of £500 to £25,000
An APR range of 7.4% to 41% Variable (typical rate is 19.9% APR Variable)
A compensation term range of 5 months to 5 years


A typical example - a customer with above average fiscal standing, borrowing £5000 for a period of 60 months would probably pay an APR ranging from 10.7 to 14% APR.
As always, a person with a good credit account may get a better deal.
Typically, for any loan type, the loan seekers credit history and DTI are the major approval parameters. Credit history throws light on the loan seekers past credit records and the DTI (Debt To Income) ratio on the current fiscal standing.


source