April 12, 2007 Mostof the loan products available in the credit market can be availed inboth secured and unsecured form. Research shows that with benefitslike no collateral against the loan amount; less paperwork and quickservice in the absence of lengthy property evaluation procedures; andno immediate risks in the event of repeated defaults or non-repaymentof the loan amount ? unsecured loans are fast catching up in the UKloan market.
However,with drawbacks like limited amount (normally up to ?25,000),high APR (as high as 41%), fixed payback method and non-negotiableloan terms and conditions, unsecured credit may turn out to be costlyand rigid. Besides, its credit limitation makes it suitable for onlysmall monetary requirements.
As can only be obtained by offering an asset (like home) ascollateral against the loan amount, the only people eligible for thisloan type are homeowners and property owners. Other eligibilitycriteria's are UK residency, over 18 years of age, credit record,employment status, DTI ratio and the value of the pledged collateral.
Pleasenote:Though securedloans offer maximum loan benefits, homeowners and propertyowners must give importance to the feasibility of getting intoproperty related legalities and risking the property for a smallamount ? because for small and urgent monetary requirements optingfor unsecured loans may be more practical.
Acollateral guarantees repayment, lenders are able to facilitate theborrowers with cost-effective benefits. Flexibility and quickattention are the most attractive features of secured credit.Other characteristics are high credit limit (normally up to?250,000), low APR (as low as 6.7%), multiple rate plans,different repayment methods and negotiable loan terms and conditions.
However, secured loanstoo have certain limitations ? collateral compulsion leading toclientele limitation, slow approval procedure and repossessionthreat. Hence, availing credit assistance on the basis of requirementand overall feasibility is recommended.
