Starting from basics. Let us first understand what exactly is unsecured personal loan?
It is nothing but a collateral-free personal loan assistance extended to borrower by lender in the wake of a financial emergency. Yes, as a borrower, you don't have to place any of your asset or property with the lender for securing this form of contractual financial aid. Hence, no risk of losing the pledged asset/property comes into picture even if you commit a default in repayment.
Importance of Credit profile
A sound and stain-free credit profile or credit score plays deciding factor in the process of lending. Yes, lenders do take credit profile seriously and it is assumed that they judge the genuineness of borrower via it. Besides, if you are a new borrower, the lender can ask the client to undergo a credit check. Yes, right to ask for credit check comes under discretionary powers of lenders/lending organisation. Hence, if the lender thinks he/she is right in rejecting your loan plea, can do so without giving any explanation to the borrower.
The idea behind implementing credit check is to determine the correct repayment ability of client. Moreover, a good credit score or profile always works in favour of the borrower when it comes to demanding any sort of credit help from external agencies.
Ignorance is never a state of bliss!
It may happen that you might be new to the whole concept of credit rating. In such cases, people are advised to contact relevant agencies and seek the access to their credit score records. Such information is also available free of cost. However, sometimes agencies can even ask you to pay. Don't worry, it won't be a heavy sum!
Can I get unsecured personal loan even if I don't have a good credit rating?
Yes, you do stand a good chance even if you don't have a sound credit profile. Reason: Fierce competition has instigated lenders/lending organisation in UK to tread on the thin line of the market. Thanks to this predominant market sentiment, people struggling with bad credit score which can be due to anything (CCJs, IVA, bankruptcy or defaults) can now find solace in
unsecured personal loans.
Still, APR (Annual Percentage Rate) is one aspect of it that can give you sleepless nights. But that can be tackled provided you have a high-speed Internet connection enabled computer system at your service. Yes, with little dedication and time, prospective borrower can find themselves an ideal deal.
Look-out for shorter repayment period!
Yes, it is advisable if the borrower seeks a loan product with the same name but with shorter repayment tenure. Reason: There is no point in repaying loan over a longer duration of time as that will only force the borrower to compromise with his/her other basic needs.
Arguably, even shorter repayment tenure period isn't the best bet as the borrower might come under severe pressure all of a sudden. But then with little planning, he/she can definitely survive the phase along with repaying the loan.
Another point to attract attention is repayment penalties clause. Yes, borrowers are advised to take a close look at the lending contract as it may contain penalty clause which might not be acceptable to him/her at all. In fact, borrowers can even ask for complimentary offers such as PPI (Protection Payment Insurance). However, they are advised to go for this package only if they have complete knowledge about it.
What if I default in repayment of loan?
In the event of a default (irrespective of the fact if it is intentional or unintentional) in case of unsecured personal loans, borrower's credit rating is bound to suffer. Moreover, lender can resort to legal action to recover his/her amount provided as loan.
