Traditionally banks and building societies offered two types of loans; secured and unsecured.
Secured loans were designed for homeowners who had a property that could act as security for the loan; unsecured loans were designed for tenants and non-homeowners who are unable to pledge a property as collateral. Secured loans typically had lower rates of interest than unsecured due to the presence of security.
The general structure of the loan market has stayed the same; there are still secured and unsecured loans, and while the secured variety has stayed relatively similar throughout, the introduction of the internet has revolutionised the unsecured market.
Not only has there been an increase in the amount of lenders offering this type of loan but there has also been a vast increase in the types of unsecured loans available, each offering a different product at different rates in order to suit any financial requirements.
Here’s an overview of the types of unsecured loans available online:
- Guarantor Loans- A specialist bad credit loan designed for those who have been declined by a mainstream lender due to their credit history. These require a homeowner guarantor to support the application and guarantee to pay the monthly repayments should the borrower fail to do so. Loan amount available typically ranges from £1000 to £5000 over a term of 1 to 5 years.
- Tenant Guarantor Loans- Similar to the standard guarantor loans these require a guarantor to support the application, the difference being the guarantor can be a tenant or non- homeowner. Again, the guarantor must have good credit and must be receiving regular income. Currently lenders will only be able to offer a £1000 product which is repayable over 12, 18 or 24 months. The interest rates will be higher than that of the homeowner guarantor due to the risk involved to the lender.
- Installment Loans- A new product offering between £100 and £1000 over a term of 1 to 12 months. The loan term is very flexible however it will be somewhat dependent on the amount borrowed, for instance: you are unable to borrow £100 over 12 months. Installment lenders will look to process each application the same day they receive it, meaning the loan can be paid out within 24 hours.
- Payday Loans- A popular new type of unsecured product offering quick cash that is designed to be repaid in full at their next payday. The payday process is very much automated meaning they will carry out a quick credit and affordability check upon receiving authorisation from the applicant, this means the process is very quick. Most lenders will offer a decision within 10 minutes of applying meaning that if the loan is approved the cash can be with the applicant within the hour.
Having taken this brief overview into account you must then find a lender that is offering the most suitable unsecured loans online. Once again the internet has revolutionised the way in which people do this, the traditional way was to search the market manually trawling various search engines! Nowadays the most popular method of finding the most suitable loan is using a loan comparison website. These will have a panel comprising of over 100 lenders meaning there is always a product to suit you.