People often get confused when they start off by looking for a personal loan, only to find that they get side-tracked along the way and start applying for unsecured loans. The truth is that unsecured and personal loans are actually the same thing. The only difference is that your typical lender might use a different name to describe the same product. Unsecured loans are better understood than personal loans, because the information that you need is right there in the title. An unsecured loan means that you don’t have to offer any form of security against the money that you borrow. In other words, you don’t have to worry about losing your home if you can’t meet repayments, because you haven’t secured the loan with any of your assets.
Rather than using a security to make sure that they can trust you, an unsecured loan provider decided whether or not they’re going to give you the money that you need by looking carefully at the details of your personal credit history. Once they have run the numbers and learned as much as they can about the way that you spend and look after money, they will determine whether you are considered to be a high-risk lender, or a regular-risk. If the threat of lending to you is not too high, then you will probably be given the unsecured loan, though you will possibly have to pay higher interest rates than you would on a secured loan.
The Basics of Credit Checks: How they Work
If you have never been exposed to the idea of a credit check before, then you might be a little confused at how someone can simply take a look at your financial history. However, credit checks are a common way for companies to decide whether or not you are too big of a risk when it comes to offering loans. The lender that you want to borrow money from will generally use an approved credit reference agency to search your address and name, as well as any previous addresses that you might have had. All of this information will be asked for when you fill out your initial loan application.
Once the credit check agency has all of the information in needs regarding your finances in the past, they will be able to calculate your credit rating, which is a number that basically indicates how risky it is to give you a personal loan. One important thing to remember about credit checks is that every time a search is requested by one of your lenders, that will be noted on your credit rating and detailed in future credit checks. Unfortunately, if you run too many credit checks and are refused loans, this could end up giving you a black mark on your record that makes future lenders more unlikely to deal with you.
If you have not had issues with your credit in the past, and you have paid of credit cards on time, then you should find that the credit check runs very smoothly, and you will be eligible for most personal loans. You should be able to check out your credit report yourself by using online resources too!
A good thing to be aware of is that using the comparison websites online that allow you to check whether a loan from one provider is as valuable as a loan from an alternative provider will not have any negative impact on your credit rating. With these services, the information that is gathered from you is only used to ensure that you are offered an accurate comparison of the loans that are currently available. A loan provider will typically only ask for a complete credit check when you submit and complete a personal loan application, and the lender will always inform you if a credit check is being carried out.
What Can I Do About my Credit Rating?
If you have a bad credit rating, then the chances are you will not be accepted for an unsecured loan. A bad credit rating indicates that you are a significant risk, which means that your lender will want to ensure that they have some form of security that ensures you will pay back the money that you borrow.
Fortunately, there are ways that you can start to build your credit rating back up over time. If you struggle with a poor credit rating, then making purchases on a 0% interest rate credit card and ensuring that you pay the balance owed off on time can start to give you a better reputation. However, as with most things regarding credit, getting your balance back on track might take some time.
If you are concerned that your credit rating may be bad, it might be best to check your report before you fill out an application for a secured loan. This way you can avoid applying for loans that you absolutely know you aren’t’ going to get.