However, with drawbacks like collateral compulsion, clientele limitation, repossession threat and slow approval procedure, secured credit may not be possible for all and at all times. Hence, the importance of unsecured loans is no less.

The most attractive feature of this loan type is that any UK resident over 18 years of age – irrespective of whether he can pledge collateral or not – can apply for an unsecured loan. As every UK resident is not a homeowner or a property owner, an unsecured loan is the only option for someone who is incapable of offering an asset as collateral, i.e., a tenant or a student.

Moreover, an unsecured loan is a good alternative for someone who is capable of offering collateral, but is unwilling to get into property related legalities or risk his property for a small amount, i.e., a homeowner or a property owner.

Please note: An unsecured loan may be the only option for tenants and students, but homeowners and property owners must choose between secured and unsecured debts wisely. Importance to the practicality or feasibility of getting into property related legalities and risking the property for a small amount is suggested.

The no collateral attribute of unsecured credit in turn leads to less paperwork and quick service, as time-consuming property evaluation procedure is not a part of this loan type. Also, in the event of repeated defaults or non-repayment, the lender has nothing to repossess.

However, this does not mean that the borrower can get away with the lender’s money. There are legal processes other than repossession that can force the borrower to use his valuables to pay back to the lender.

Hence, an unsecured loans is the right choice for a small monetary requirement, as offering collateral may not be essential, and for an urgent monetary requirement too, as getting into extensive property evaluation procedures may not be possible.

As no loan type is 100% safe, the limitations of unsecured credit – in the absence of collateral – are limited amount, high interest rates, fixed payback option, and preset loan terms and conditions.