Unsecured loan meaning is something we can help you with. Our expert banking lawyers can advise both borrower and financiers on the advantages and disadvantages of an unsecured loan.
- advantages for borrowers – borrowers which own few physical assets may need business funding but cannot provide any security to the lender to support the business loan. In these circumstances an unsecured loan would be the only way forward. This is also true if the business is unable to obtain the support of a third party to provide a guarantee, indemnity or other form of security.
- advantages for lenders – you may ask yourself what possible advantage could there be for a lender to grant an unsecured loan to a borrower? The simple answer is interest, the lender can charge a much higher rate of interest on an unsecured loan than on a secured loan to take into account the higher risks associated with this form of lending.
- disadvantages for borrowers – these types of business loans typically have higher interest rates than secured loans which make them more expensive for the borrower. Additionally, the lender is likely to only be prepared to loan a percentage of the money that borrower may seek, meaning the borrower needs to introduce some of its own cash. This deposit may be prohibitive for the borrower if it does not have any savings in place.
- disadvantages for lenders – Although the lender has the benefit of receiving a higher interest rate, there is a higher chance of suffering a loss in the event of a default under the loan agreement . If the borrower becomes insolvent, the lender as an unsecured creditor will rank low in the order of priorities on a winding up and would be lucky to recover any money at all.
Please contact one of our lawyers for your friendly informal consultation on unsecured loans. At Francis Wilks & Jones, we have significant experience in transactions involving unsecured loans. We are highly skilled and have advised many companies on their unsecured loans. We offer quick and effective advice. Whatever your situation, don’t delay. Call now for a friendly consultation.