How unsecured loans are being shaken up by peer-to-peer lending

Unsecured loans. There’s a tangible negativity in the name that can easily breed doubt for those not well versed on the subject. Yet any stigmas – or even automatic associations with less scrupulous credit providers such as payday lenders – are often wide of the mark. Instead, most lenders in this market are reputable ones who are offering consumers a financial option if they feel that this is the right thing to do in their current circumstances.

Quite simply, unsecured loans or personal loans mean that you can take on a debt from a lender without having to provide some sort of security, such as a car or house for example, which would then be at risk in the case of not being able to repay the loan. Although personal loans are easier to obtain, in principle, for this added risk posed to the lender, they generally command a higher interest rate on repayments.

However, this isn’t actually necessarily the case, and unsecured loan providers of all shapes and sizes are coming through the ranks by offering borrowers immensely competitive APRs on their loan repayments, with minimal – or even zero – hidden fees, and even less fuss.

Arguably one of the biggest success stories in this regard has been the meteoric rise of the peer-to-peer lending (P2P) sector in the UK. Now a multi-billion-pound industry, these platforms are able to minimise overheads by functioning entirely online. Perhaps the biggest drawcard of all is that by matching shrewd investors (or lenders) who have cash to spare directly with those seeking personal loans, they are able to cut out intermediaries such as banks in the process – thus bringing the huge benefit of value to all parties involved.

In short, you can apply for a quote on a personal loan in a matter of minutes, complete your application by filling out a quick form online, and, if approved, have the money in your account within one working day. Many also offer a good degree of flexibility on the loan, be that the amount you wish to take out, or the term over which you would like to pay it back. Some P2P lenders, such as Lending Works, even give you the option to make overpayments or repay the loan early at no extra cost.

Certainly, the days of blindly filling out a pile of paperwork for a loan with your mortgage provider or bank, only to be either denied or offered an unreasonable APR, are numbered. Such hassle and frustration is quickly making way for the many credible and viable alternatives which continue to pop up, and peer-to-peer lenders are firmly establishing their place in this sector.

Indeed, unsecured loans are not all bad and there are certainly situations where it can make sense to consider this option – such as when making home improvements, starting a business or consolidating debts, for example.

When looking at personal loan options however, be sure to shop around and find the best deal for you. The most important thing to realise is that if you’ve exhausted all options of the secured loan variety – there are still other avenues in the world of unsecured loans which could provide you with the financial solution you are looking for.

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