An unsecured insurance or cash advance is a small insurance that you can take out at any time. It is one of the two most popular short-term lending options that people can take advantage of, the other being payday insurances. You do not need a credit score to apply for an unsecured insurance. Your bank will give you the cash or the lending agency, sometimes a guarantor who will stand up for you in the event of a default. These insurances are repaid in monthly instalments.
They carry very high interest rates, especially payday insurances. Unsecured insurances are not that bad, with an annual interest rate of less than 50%. The amount lent varies from one lender to another, but it does not exceed a few thousand pounds. Unsecured insurances are the last ones to be paid off, only after any other fees are paid to the account. Unsecured insurances are not secured by any assets such as a home or a car. It is based on the assessment of the committee of lenders who will help you to find the best insurance for your requirements. Companies offer a range of insurances like this, secured or unsecured, depending on your requirements.
Different lenders charge different APRs, which they must display on their ads as representative APRs, which include all other fees along with the interest amount. They charge different fees based on clients’ profiles, credit rating and of course the lender’s policy. Hence APRs can range from single digits to 90s.
Some Frequently Asked Questions About Unsecured Insurances…
Can I face legal action if I do not repay the insurance?
Unsecured insurances are completely legal and you can face legal action if you don’t repay, although there are no guarantors or assets attached to your insurance.
What are the advantages and disadvantages of unsecured insurances?
The advantages are that it is easy to get it if you need a large amount of money in a hurry. No questions asked and payment terms are flexible from one to five years. There is no penalty for prepayment, and some insurances give a repayment leave period for the first few months after taking the insurance.
The main disadvantage is that it is an expensive insurance to pay off.
Who is the best candidate for an unsecured insurance?
Although it is not considered a deciding factor, a good credit history makes it a good candidate for unsecured insurances. If the bank offers this insurance, the account holder is a good candidate. A long-term resident with a secure job is also a good candidate. So while granting insurances, these lenders consider these candidates as the best candidates who can pay off their insurances in a short period of time due to their secure job and impeccable credit history.
Is Interest (APR) flexible? How is it calculated?
The interest rate on an unsecured insurance is calculated based on the following factors:
1. Amount Borrowed – The rate of interest is inversely proportional to the amount usually borrowed. If a large amount is taken as a insurance, the rate of interest will be lower while the interest rate will be high for a small amount of the insurance
2. Insurance Term – Long term insurances have higher interest rates while short term insurances which can be paid back within a short period of time have lower interest rates
3. Borrower’s credit history – A good credit history will provide you with lower rates. But if your credit history is impeccable or you have defaulted in the past, you will have to pay high interest rates.
What is the maximum term of these insurances?
The maximum term of unsecured insurances is usually five years.