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A detailed look at Unsecured Loans and Unsecured Lending...

Unsecured Lending is the term used for financial advances that are not backed-up with any form of guarantee or security. These types of loan are more commonly referred to as Unsecured Loans or Personal Loans.

Here we take a more detailed look at Unsecured Loans / Unsecured Lending and how they work, together with their advantages and disadvantages. It's important to know that Shire Direct cannot assist with this type of loan, but we thought it would probably be useful to have this information to hand so you can decide whether an Unsecured Loan is really what you require.

What is an Unsecured Loan, and how does Unsecured Lending work?

So, to recap then Unsecured Loans (also commonly known as 'Personal Loans') are a type of financial advance from a lender that aren't backed-up with any kind of guarantee or security.

There are two basic types of loan arrangements, let's take a quick look at them to give you a better idea of how unsecured lending works....

  • Unsecured Loans: offer the lender no form of security, and thus, in the event of default, there are few courses available to the lender, other than court action, for debt recovery.

    There are a variety of forms of unsecured borrowings, and these include: personal loans, credit cards, store cards, overdrafts etc.

  • Secured Loans: are those transactions backed-up with some form of collateral asset, for example a loan secured by second mortgage over the equity in a customer's property.

    A Hire Purchase (HP) arrangement, for example for the acquisition of a motorcar, is another type of secured loan. Here the vehicle acts as security, and in the event the borrower defaults in the instalments, the motor car would be repossessed.

Advantages of Unsecured Loans:

There are several benefits of Unsecured Loans and unsecured lending over secured borrowing and these include one or more of the following:

  • Unsecured lending can usually be arranged much more quickly than a secured loan.

  • No security is required, therefore if the borrower is a homeowner, their property will not be at risk of repossession in the event of default.

Disadvantages of Unsecured Loans

Conversely, there are some downsides and drawbacks with unsecured lending and an unsecured loan over a loan based on providing some form of security:

  • Because of the fact that there is no asset-backed security to act as a guarantee for the lender, interest rates are generally more expensive on unsecured credit transactions.

  • Repayment terms are usually considerably more flexible with secured loan arrangements. For example, unsecured loans are generally restricted to a 5 or 7-year term, whereas a secured loan will usually span between 3 and 25 years.

  • Considerably higher amounts can be borrowed on a secured loans basis, up to £100,000 can be advanced provided that the customer can afford the repayments, and there is available equity in the property acting as security, whereas unsecured loan maximums are often restricted to £15,000, and occasionally £25,000.

  • The underwriting criteria, is much more flexible with secured loans, than unsecured borrowings. Secured Lenders are much more likely to accept applications from borrowers who may have experienced credit difficulties such as County Court Judgements (CCJs), default or arrears, whereas competitively-rated unsecured loans are not usually available to this type of adverse credit situation.

There are a few lenders that will advance smaller unsecured loans to tenants, or homeowners that have a poor credit history. However, you should carefully examine the deal before committing yourself as interest rates are often between 30% and 40% APR. Some "doorstep" lenders have even be known to levy rates of over 1000%!

Can Shire Direct help me if I require an Unsecured Loan?

Unfortunately this is one occasion where we are unable to help out. Here at Shire Direct, we specialise in the provision of mortgages, remortgages and homeowner loans.

However...! If you have been turned down by an unsecured lender, or feel that the rate you're being charged is prohibitive, then please don't hesitate to give us a call on Freephone 08000 282 281 (our lines are open 7-days a week until 10pm), and we'll quickly let you know the options available to you, be it either a secured loan, or a mortgage product! Alternatively why not enquire online at any time, and we'll be delighted to help in any way we can.

Well that concludes our look at Unsecured Loans, and Unsecured Lending. Don't forget there is much more information throughout our site and if you feel we can be of assistance with anything remember that we're only ever a free telephone call or a couple of mouse clicks away and would love to hear from you!

Enquire Online now, or call us today 08000 282 281 - our freephone lines are open 8am-10pm everyday! We'd love to hear from you!

Mortgages/Remortgages: The overall cost for comparison is 9.8% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.

There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances. For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.

Homeowner Loans: Rates from 8.9% APR variable, but typically 13.9% APR variable. Most customers are likely to receive a lower rate or the same rate as our typical variable rate - learn more about APR. Shire Direct also has a range of non-conforming loan plans with rates up to 19.9% APR. These plans are designed to help those who may have a more difficult credit history, including CCJ's and credit arrears, IVA and bankruptcy problems.
A broker fee of between 0% and 10% of the loan advance may be charged for arranging a secured loan.
All loans subject to status and secured on property.
The actual rate available will depend upon your circumstances. Written quotations on request.

THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

Adding existing debt to your mortgage will increase the repayment term and overall cost.

Shire Direct and Shire Direct Mortgages are trading styles of Shire Processing Centre Limited which is
Authorised and regulated by the Financial Services Authority in respect of regulated mortgage products and general insurances.
Registered No: 302389. Commercial funding and Secured Loans are not regulated by the FSA.
Licensed Credit Brokers. Consumer Credit Licence Number: 349999.

Shire Processing Centre Limited is registered under the provisions of the Data Protection Act by the Information Commissioners Office: Registration No: Z6795249. Registered in England & Wales. Company number: 2732202. Telephone calls may be recorded for training, monitoring and security purposes. All applicants must be aged 18-years or over.