Unsecured loans such as payday loans are notoriously popular for getting struggling borrowers with bad credit into a debt trap. Payday loans, in particular, are widely criticized for their steep interest and hefty fees. Once you started borrowing, it’s difficult to get out.
Unsecured loans, however, are not restricted to only payday loans. As banks and high street lenders offer unsecured loans, the financial product has moved upscale and has now become a viable option even for people with good credit.
In order to keep up with the competition, banks lure customers with personal loans at competitive interest rates. They target those who are less likely to default offering them personal loans they can use to pay off high interest credit cards and other types of debts. This strategy thus far is working. In fact, the banking industry has offered billions of personal loans for borrowers across UK. It also looks like that the trend is not going to slow down anytime soon.
Because unsecured personal loans are not secured against any asset, the financial product is less risky for borrowers and less risk is often an irresistible incentive many can’t refuse. Other than that, these loans are also processed quickly. For borrowers with a good credit score, approval is confirmed within hours after the application is assessed. This means quick cash at an affordable rate without the worries of repossession.
To answer the question if it’s wise to take out an unsecured loan when you have bad credit, it’s a big yes. With banks tailoring their offers in a way that will benefit borrowers the most, you shouldn’t think twice but take advantage. Grab the opportunity while it lasts and use the money as recommended to repay your high interest credit card bills and other debt. This way, you lower your overall debt interest while fast tracking your journey towards financial freedom. Like with any other type of loans, however, just make sure you borrow only what you can afford to repay.