In our previous blog, we started a conversation about the different types of secured borrowing available to you. However, given the wide range of possibilities in borrowing, we were only able to cover the different types of secured loans.
While secured loans are one of the most commonly used types of debt, not everyone has enough collateral to acquire one. Therefore, for those who wish to get a loan without collateral, unsecured borrowing may be a better option.
When it comes to unsecured borrowing, there is a large variety of options that you can choose from. However, the ones accessible to you vary based on a number of factors like credit score, employment status, interest rates, etc.
We understand that borrowing can get complicated. That’s why, today, we are going to talk about the top 7 types of unsecured loans available.
1. More Than Your Score Loans
Starting off the list with our very own “More Than Your Score” loans, we offer fair, unsecured loans at competitive interest rates.
Now we’re sure you’re wondering what is the difference between our loans and an average personal or payday loan. Well, there is one and it is huge.
At Salad Money, we believe that the traditional form of assessing creditworthiness using credit scores is unfair to some borrowers. That’s why we provide our affordable personal loans to working professionals using an open banking-based affordability assessment. Furthermore, unlike payday loans, Salad Money loans aren’t incredibly short-term. Rather borrowers typically pay over a period of 12 to 18 months. This way, with Salad Money, you can rest assured that you are getting the best unsecured loans regardless of your credit score.
2. Credit Cards
Credit cards are the single most popular type of unsecured debt in the world. However, although credit cards make borrowing incredibly easy, they are not without their disadvantages.
Widely known as revolving debt, credit card borrowing does not have a set time frame, meaning your credit limit is always available, so long as it’s paid off. Unlike the fixed instalments in personal loans, credit cards only require you to pay a variable minimum payment each month to keep your card going.
This allows you an extensive level of flexibility while repaying your debt.
The disadvantages we were talking about, however, are the high-interest rates. While there are a few credit cards that don’t charge any interest, most others charge you a high-interest rate. Moreover, if you only aim to stick to paying minimum payments, credit card debt can become very expensive and you may be stuck paying it off for a long period of time.
3. Personal Loans
After credit cards, typically one of the most common types of unsecured borrowing on this list, personal loans are simple unsecured loans usually acquired from a bank. Many people use personal loans for various reasons including wedding expenses, purchasing a car, home repairs, etc.
These loans are repaid over a period of time, usually falling anywhere between 1 to 10 years. The interest rates available mostly depend on the term and the borrower’s credit report, as well as the rates set by the Bank of England.
However, when it comes to personal loans, the charges, interest rates, durations and various other terms and conditions vary from lender to lender. Therefore, before you decide on one, it is always a good idea to compare the features of a loan and thoroughly go through the terms and conditions of the loan.
Overdrafts are up there with credit cards and personal loans for a form of borrowing that we all use from time to time.
Your overdraft is usually offered by banks on your current accounts where you can use more money than is available in your account, to a certain limit.
Your bank is almost certain to offer an overdraft, often with an interest free threshold. However, once going over your threshold, interest rates can become much higher.
5. Student Loans
A very scenario specific type of borrowing, but incredibly common for university students. Commonly offered by student loan companies and some banks, student loans are backed by the government to help UK students with their university qualifications.
These loans usually cover the tuition and living costs of students based on various criteria like household income, etc. Student loans are repaid once the student gets a job and their salary reaches a certain amount out of which the repayments are deducted in instalments.
6. Buy Now, Pay Later Schemes
Buy Now, Pay Later schemes have now become increasingly popular as more and more online stores have begun offering this facility. For those who don’t know, these schemes allow you to buy products or services from selected online providers for a lower price (typically ?) and pay the remaining balance over a period of months.
While they do not loan you actual money, they provide you with the purchasing power you need to buy things you need. These schemes allow you to repay the amount on a later date or in instalments over a period of time. However currently these schemes are under regulated and can result in large debt problems if used in an unaffordable way.
7. Debt Consolidation Loans
While the basic idea of debt consolidation loans is not very different from your normal personal loan, what makes it different is its purpose. Debt consolidation loans are used to consolidate your debt by paying all other creditors at once.
This prevents you from paying higher accumulated interest to different creditors and ensures that you only have one debt repayment to manage. Read our blog about debt consolidation to learn more.
Choose Salad Money For Fair and Affordable Personal Loans
Now that you know all about the different types of unsecured debt, you can make more informed decisions on when, how and what to borrow.
However, if you are a working professional who believes that the credit score has treated you unfairly, you can always turn to us for your personal loan needs.
At Salad Money, we can provide you with fair and affordable personal loans regardless of your credit score. To learn more about our services, click here and for more articles like these visit our news page today!