The numbers of people using unsecured loans are increasing every year that shows that the tilt towards this borrowing option rather than the secured borrowing. As the demand is increasing, the numbers of lenders are also increasing. As being the consumer, every borrower has own parameters to judge and choose the loan offer; therefore, the lenders are expanding the variety in lending modules. The easy availability makes these loans a preferred choice but before opting it, you should have a look over the hidden trends also to be conscious of planning right.
Unsecured Borrowing – A Growing Concern for Govt.:
Northampton is identified for having the highest level of the loan per capita at £753 closely followed by Salisbury having £750 per capita debt. The growing trend of unsecured borrowing can be seen in the following graph: The chart shows the overall increase in demand since 1993 sparing few years 2004 to 2010. During 2018, the average APR for £5,000 unsecured loan remained 8.04% and for £10,000, APR was 3.79%. In 2017, a £191 billion was borrowed with the increment of 31% compared to £146 billion borrowed in 2012. Unlike the larger amount of loans, secured against assets or valuable property, unsecured debts have a risk for financing body as well as for the borrower. The lender is worried for the one-time recovery of credited money with interest rate, while the borrower is more concerned for on the time payment to avoid late payment fees.
Majority of unsecured consumer loans are taken to pay monthly bills, pay for purchases, holiday tour, and home improvements etc. The total household debt/income ratio is forecasted to grow @ 8% per cent during the five years period up to 2023. According to a report by Whitehall spending watchdog, the economy is losing about £900m per year because of the rapid rise in personal borrowing problems. The problems allied to government lending increased 40% last year if compared with same nature problems in 2011. Naturally, the mounting debt at a rapid rate is raising the alarms for the Govt. Stricter eligibility criteria for borrowing from the high street Govt. banks is the result of same concern noticed by the officials.
Why Should You Opt For Unsecured Loan? The Benefits:
Unsecured personal borrowing has lots of benefits that make it a preferred choice of borrowers from all the communities:
- Personal property is not at risk – You wouldn’t lose the assets or property if you don’t repay the loan because of unforeseen circumstances.
- Freedom to use – You are free to use the borrowed money for any purpose; may it be holiday tour, marriage, debt consolidation, medical expenses etc.
- Cheaper than a credit card – The unsecured personal loans are made available at a lower annual percentage rate if compared to that of credit cards.
- Quick and simple to apply – All the prominent direct lenders work with the online module; applying for borrowing is simple and quick as it doesn’t need any complex documentation.
- Control over repayment – The instalment personal loan gives you the freedom to choose the numbers of instalments according to your repaying capability; therefore, you feel financially stress-free until the debt is paid off.
When Should You Prefer Unsecured Personal Loan?
The unsecured personal loan is often a small amount of short-term loan that can be repaid in monthly instalment. The normal repayment period is 12 months; or, it can be extended as per borrower’s comfort. If you need a small amount for a small period, it is the best choice. Unsecured debt is good if you don’t have any asset or property to mortgage. Mortgaging the property of a value more than the borrowed amount is not good; as the lender may take on the mortgaged property or asset. Unsecured short-term debt is a good option if you have steady earning or if you are sure to get some funds within a few days. Here are seven tips to enjoy the benefits of short-term personal unsecured loan:
- Do not approach too many direct lenders
- Calculate and compare the total cost, annual percentage rate, interest rate
- Be assure of other charges
- Do not opt for EMIs in advance
- Deal only with Government authorized reputed and well settled experienced lender
- Minimise the required amount
- Keep the repayment period comfortably minimum