Wait! Wasn’t the word ‘unsecured’ meant for loans?
Well, the word unsecured may apply to a good many things apart from a loan. Debts are unsecured too. This is the reason you see this post.
The fundamental reason to say this is the presence of the collateral. The collateral is an asset against which a financial process takes place. The requirement for collateral is a common practice for loans and debts. It can mean your home or your car, or any property that you want to use for a financial exchange.
The collateral supplies the party receiving money with a secondary option. If the payer defaults, then the receiver might take hold of the collateral and use its values to get back the money that the payer owes to the receiver.
In that light, collateral makes any financial exchange a secured one. If you are looking for an unsecured financial exchange, there won’t be any involvement of collateral, and the said exchange will solely be based on money.
It is clear to you now that an unsecured debt is but a debt without the need for collateral.
Want to know more about it? Well, you may read to find out.
What Unsecured Debts Means and 5 Kinds of Them
Unsecured debts are debts without collateral. You have just read that, right? Well, in many cases, these debts are found commonly in many monetary exchanges all over the world. You can also find yourself in unsecured debt. Chances are you are suffering yourself at this moment.
Although you can quickly recover from this problem with an unsecured loan for debt consolidation, you may need to learn a little about debts in general.
Unsecured debts involve zero collateral. Hence, lenders may find it a little riskier to gain money from borrowers if they face serious troubles with money and income. It is true that legal regulations will not force a borrower if the party defaults on a loan. But again, it will be riskier for lenders.
That is why lenders might look for alternative ways. They need the repayment, yet they cannot push a defaulter. Instead, a lender may take the following options:
The borrower might be given time to resume repayment. But, in that case, interest rates and extra fees might apply.
- Lenders often take the help of a Credit Collection Agency. This agency further investigates the matter and may show up at the door of the borrower to get finalised statements on repayment.
- Sometimes, a lender might take the borrower’s name to court for Judgement. This is known as a County Court Judgement or a CCJ. It affects the borrower’s financial sphere with some stress.
- Often borrowers may find themselves in a tricky condition for defaulting on a loan. It may happen for several causes, such as a low income or a poor credit score. Luckily, a quick solution to this waits for the lenders themselves. For that, one may need to choose direct lenders.
The solution comes in the form of a debt consolidation loan for bad credit in the UK. Direct lenders make it more comfortable because they are authorised to deliver such lending assistance chiefly. You can get these loans in an unsecured way. You no longer have to worry about collateral to consolidate your debts. Additionally, you are saved a lot of time for verification and other formalities because these loans are paperless and can reach you only if you can show your lenders a steady way of repaying the loan.
And if you don’t think you can have a steady way of repaying the loan, then have a word with your direct lender. Any direct lending assistance is going to aid you with quick and practical lending advice.
With that being said, we must also state that consolidating an unsecured debt also needs some knowledge and insight to understand what you are signing up for and how you may work your way out to consolidate such a debt effectively.
- Credit Card Debts
A credit card may be a small plastic card the size of a normal playing card. But it packs in a lot of information and monetary value in it. Having a credit card alongside you is always suitable for making cashless payments efficiently.
But a credit card also has rules of its own. You have to make timely credit card payments to supply your credit card provider with the fees and the APR, which is the annual percentage rate. There is something called the credit limit as well. Spending more money than the limit and making late payments may get you stuck in credit card debt.
- Student Loans
Many students face student loan debt because they take out an amount of money without being sure of the repayment methods. They indeed face roubles in earning money at an early age.
It is again confirmed that many of them sacrifice their studies and relaxation to earn money by working part-time or freelancing to repay the loan. But, sometimes, not earning enough money and having complicated study requirements make them get into student loan debt.
- Medical Debt
It is very common for you to get stuck in medical debt. A medical emergency might happen suddenly without giving you the slightest hints.
This may lead to high expenses. Although healthcare organisations will consider compromising some costs through privacy policies and alternative income options, your costs stack up and ultimately translate as medical debt.
- Unpaid Utility Bills
Your electricity bill and water bills can become an unsecured debt. Often, due to financial problems; a medical emergency or other urgent issues; unemployment and more; you miss out on paying your utility bills and finally get to a victim of unsecured debt.
- Business Debts
Let’s say you took out a loan from a lender to finance your business. You made it for a new line of products, which probably didn’t make profits as you envisioned it. As a result, you get stuck in something called business debt.
And that, without collateral, is another unsecured debt.
To Conclude
Are you suffering from any one of these debts?
Do you need a debt consolidation loan at affordable rates?
We may answer these questions for you. Get in touch with us to know how we help you better treat an unsecured debt issue with our loan options. Feel free to talk to us or message us. We will help you out.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
