Unsecured loans are the most sought after loan products in the UK loan market. The borrowers feel secured as their loans are unsecured. Anybody who goes for a loan has three things in mind- his financial requirements get fulfilled, he gets loan at a low APR, and the deal involves less risk for him. Risk is measured by the presence or absence of asset as collateral. Unsecured loans are popular because the borrowers need not pledge any asset in lieu of getting the loan.
However, absence of security increases the risk for the lenders. He can take legal action against the borrower, should the latter default on the loan repayment. However, the case usually takes a long time to be settled. So, the lender covers the risk by charging high APR on unsecured loans. The amount that can be availed as unsecured loans is less as well. So, if you need finances for a major project like buying a house, secured loans will serve you better.
People generally look for cheap unsecured loans in the market. But getting it is indeed a daunting task. If you have an excellent repayment history, credit score and DTI (debt to consolidation) ratio, you may get a cheap unsecured loan; but the APR charged will still be higher than that charged on secured loans. Market research and trends prove that most unsecured loans are taken for debt consolidation. People with multiple debts don't really have any good credit score to boast of. So, getting cheap unsecured loans can be difficult. There are bad credit unsecured loans in the market as well. Sub-prime lenders offer these loans to the borrowers suffering from poor credit score owing to recurrent arrears and defaults.
Borrowers looking for cheap unsecured loans need to have an excellent credit history. High street lenders don't prefer giving unsecured loans, more so after the increase in the rate of personal insolvencies in UK over the past year. But with online media becoming popular, one can look for these loans on the Internet.