Declarations by Alliance & Leicester and HBOS, two of the five leading high street banks in the UK, have alarmed the borrowers. Both the banks while announcing their profits declared that owing to increase in the defaults on debts, they'll have a stringent policy for granting unsecured loan this year. It has been found that most Britons who take debt consolidation loans finally end up multiplying their debts. There are two major reasons to it.

• Taking more money than required- Either by their own will or because of misguidance by the lending institutions, people take more money as unsecured loan than they actually require. This loan amount they can't afford to pay and this eventually calls for arrears, defaults, bad credit scores and adverse debts.
  
  
• No consultancy from debts management firms- Borrowers who have already fallen in the ditch of bad debts should take refuge with a debt management firms. This can actually help them in managing their finances in a better way. Most Britons don't take proper financial guidance when necessary. This worsens their already deteriorated credit situation.

So, before availing an unsecured loan, the borrower should know the true cost of the loan, and the terms and conditions of the loan deal. This prevents later shocks. It also helps the borrower in repaying the loan at regular intervals. Unsecured loans are by nature costly loans for the borrower. Since the risk involved for the lender is on the higher side, the lender compensates it by charging a high APR. However, one can still of hope of getting competitive interest rates on unsecured loan as well, if he fulfils the following criteria.

• Good credit score- If the borrower has a good credit record and a decent repayment history, the lender feels more assured. The lender may, in this case, offer a lucrative unsecured loan deal to the borrower.
  
  
• Owing a home- If you own a home in the UK, there are chances that the lender will charge you a comparatively lower APR than those charged to non-homeowners.

Finding good deals on unsecured loans have become easier with the advent of online marketing of loans. This, along with having made the process simpler and easier, has increased competition among the lenders. So, the borrower now has choices that he lacked before. For instance, if you get an unsecured loan rejection from a high street bank, you can apply to private lenders and online lenders. There are many deals on unsecured loans available with the UK online loan market.