Unsecured loans are a great way to obtain financing for something you need, especially when other loan options are unavailable. Regular loans from traditional financial institutions, like banks, require some sort of security, also known as collateral. This is where the advantage of an unsecured loan comes in – it does not require collateral, so even people who do not hold significant assets can be accepted for a loan.
The amount you can get is based on your income, as well as your credit score, so you might want to look or unsecured loans for people with bad credit if you think you need them. Therefore, even if you can't guarantee with an asset, you can still get a decent amount for your needs, as long as you meet certain requirements. You do need to keep in mind a few things, though:
- It is more difficult to be accepted for an unsecured loan than a secured one
- Am unsecured loan is going to cost more
- Repayment instalments are going to be higher
Even so, there are certain things you can do in order to chase the cheapest unsecured loan that will be suitable to your needs.
Get a guarantor to sign with you
By far, the easiest way to get an unsecured loan is to get someone to sign with you. A co-signer, or guarantor acts as a means of security for the lender, in case you default on your loan and there are no assets to back it up. For you, personally, this is the least amount of effort, because all you have to do is find a suitable person and all they have to do is sign a document.
However, the problem with this option is that it can be easier said than done. It's a somewhat risky position to put someone in, because at the end of the day, anything can happen and you can find yourself unexpectedly unable to pay. That leaves your guarantor to take responsibility for you. So you either need someone who trusts you completely, or opt for unsecured loans without a guarantor.
Set up a repayment plan
When you ask for a loan, you do it with the knowledge that the money will have to be paid back, usually on the terms imposed by the financial institution. But no one says you can't go in with a well-defined plan to begin with. Take some time to sit down and make some calculations and projections and present your repayment plan when you're making your application.
Any lending company will be impressed by how responsible you are and that you're taking the matter seriously. Most people don't bother, so they will be much more likely to grant you the loan if you show you're prepared and you've given it a lot of thought.
Pull up your credit score
One of the main issues people face when applying for loans is that their poor credit score is affecting their likelihood of being accepted. Now, you can accept that situation and start looking for unsecured loans with bad credit and all the restrictions they come with, or you can be proactive and start pulling up your credit score. The fact that you've never even considered it is an even stronger reason to do it.
But what can you do to improve your credit score?
- Don't open new credit cards if you're considering applying for a loan
- Check your credit report for mistakes and then get them to fix them
- Pay off all credit card balances you may have lingering
- Pay off any and all debts you have
Opt for a Peer-to-Peer lender
You may not be aware of this, but unsecured personal loans aren't only available from lending companies; individuals can grant them as well. They're called peer-to-peer loans and they usually operate on a platform where all the potential lenders are found. You apply for a loan and the lenders determine whether or not they want to give you the money. An example is Zopa.
Now, a few things you need to know about this type of lending:
- The vast majority of aspiring borrowers are turned down
- You must have excellent credit to be considered
- The process works like an auction, only the other way around; the lender with the lowest rate wins
- Quick unsecured cash loans from individuals come with lower rates than ones from companies
Don't get loans with high fees
This tip may seem obvious, but try to avoid opting for loans with high fees. Sometimes, they won't be obvious at all, so this means you need to carefully comb through the contracts and the terms presented in them. Extra fees include:
- Continuous interest on an unpaid balance
- Fee for early repayment of the full loan
- Massive application fees
Obviously, these kinds of charges won't be advertised, so you have to be attentive enough to find them if they are present and then hopefully be able to find a suitable alternative to this loan, so that you can escape the unnecessary fees. Remember they always must appear on the contract; hidden fees are a complete deal-breaker.
In conclusion, if you don't have the assets to back up a secured loan and you're after an unsecured one, you don't necessarily have to pay more. While it will be more expensive to get an unsecured loan than a secured one, there are ways to find cheaper loans and make sure that you don't pay more than you need to.
|Final tips for a cheap unsecured loan|
|Shop around before you decide on a loan|
|Read all the terms and conditions carefully so you don't end up with surprise charges|
|Look into the lending company and check if they are authorised|