When only a smaller financial need is to be met, unsecured loans can be ideal, as there are almost no risks in borrowing the loan, provided you have ascertained some conditions. It is advisable to first take some steps before applying for these loans.
Take out your credit report from all the three credit rating agencies. The lenders will study the report minutely in order to assess the risks. Hence, ensure that the report has correctly mentioned all the payments that you made in the past. In case your credit rating has currently dipped, then it is advisable to first pay off some old debts, and then apply for the loan with an improvement in the rating.
Unsecured loans do not require you to pledge any property for collateral. This makes the loan easier for tenants, while homeowners can also find the loan. But, only a smaller loan of 1000 to 25000Euros is given, depending on your repayment capability that is assessed through your earnings and bank statements. These are short-term loans, with repayment in six months to 15 years.
Absence of collateral implies that the risks for the lenders go higher. Hence, they charge interest at higher rate. Usually, on smaller loan like this one, the rate is fixed for the entire duration, meaning that you will be making the fixed monthly payments for the installments.
For bad or poor credit people, these loans are given only when the borrower is willing to take out the loan at higher interest rate. So, despite late payments, defaults, arrears and CCJs, the loan can be found out for your circumstances.
You can make use of the loan for home improvements, paying off tuition fee or old debts, purchasing a car, wedding, holiday tour etc. But, to take out unsecured loans at competitive rates, compare different offers on internet. Settle for a deal that also has fewer additional costs.