Unsecured Personal Loans are popular among the borrowers for two major reasons. First, you do not need to own a home to qualify for the loan. In other words, the borrower can avail an unsecured loan without pledging any asset as collateral. Secondly, these loans are processed fast since there is no need for property valuation and others such legal formalities. Less documentation is an added advantage. For borrowers, unsecured loans are low risk loans because of the absence of security. The Lender, however, compensates the risk involved for him by charging a higher APR in comparison to the secured loans.
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Getting an unsecured loan is not as easy as availing a secured loan. Since the lender is at risk, he'll thoroughly check your credit history and repayment record to be sure that you'll repay him his money. Unsecured personal loans are governed by the Consumer Credit Act, 1974. The act has stringent regulations on how the money must be lent. The act allows unsecured loans up to £25,000 and these loans are known as 'regulated loans'. But, lenders prefer not to lend more than £10,000. Thanks to the popularity of online loans, lenders have also started offering hefty amounts on unsecured loans, depending on the debtor's profile.
Before procuring unsecured loans, the borrower is asked to sign a credit agreement, and he'll be thereafter bound by it's terms. So, its always advisable for the borrower to carefully go through each minute detail of the loan agreement. The customers for availing a fast unsecured loan tend to neglect the vitalities of the loan agreement. This should be avoided. If at all there is some disparity between what is written and what was offered verbally, the borrower should talk to the lender directly and rectify the errors through mutual cooperation.
As extra protection for both the borrower and the lender, insurance policies (known as payment protection insurance) are available. PPI covers the debtors' repayments in the event of sickness, accident or unemployment. Although beneficial, these policies can be costly very expensive. the borrower can always bargain on terms of PPI. So, before venturing into the task of availing online unsecured loans, one should always go through the term and conditions and other legal issues carefully.
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