The UK loan marketplace offers plenty of options to utilise during different financial situations, such as financial emergencies, unemployment, merging debts, and many more. Primarily, people have to choose between short-term loans and loans available for a longer duration, according to their current circumstances and financial capacity.

Short-term loans are available for smaller loan amounts like £1000 or up to £5000, and for shorter durations, like a maximum of up to 36 months. These are unsecured loans for most of the part and, thus, carry higher interest rates.

According to the loan experts, you should pick the ideal time to go for these loans and it is possibly during a financial emergency. You can also apply when you need a small funding backup.

On the other hand, long-term loans reflect more considerable funding and for a longer duration. Since they are required to borrow a large amount, aspirants need to submit collateral to secure the loan money. Moreover, the secured nature of these loans paves the way for lower interest rates.

As any type of loan is based on the prevailing circumstances, it has been found that long-term loans have more stability for the applicant’s finances. What will be the possible reasons?

• These loans carry lower interest rates overall due to the longer duration;
• The borrowers will have smaller monthly instalments to pay, which means they can better manage their monthly income.

These are a few reasons, and of course, there will be many. Most significantly, these loans have been highly beneficial in different financial circumstances.

5 surprises to obtain while applying for long-term loans

Loans for longer duration have many advantages, but at the same time, they can give inevitable surprises as well. Do not worry as they will not prove disadvantageous for you. Let us start a discussion on them.

• Available for those with bad credit

Mainstream lenders in the UK are very strict on those with lower credit scores. They consider these individuals as risky borrowers. Thus, they tend to deny their loan requests or charge a very high interest rate. On the other hand, the direct lending marketplace may surprise people with lower bad credit scores by providing them with long-term loans for bad credit, too.

However, certain conditions will be implied, such as borrowers having to arrange a guarantor or place the collateral. In addition, they should have performed well in handling the recent payments and living a debt-free life.

The advantage of a soft credit check is that it will be there from a responsible direct lender. It helps you a lot to not have any search footprint on your credit profile.

• There is no compulsion for a guarantor

Another surprise is the opportunity to get a long-term bad credit loan UK direct lender. It is very rare to see this in the marketplace, but some direct lenders provide it. They do not ask borrowers to bring another person in between the loan process just to avail of their loan guarantee. Instead, the loan providers focus on the aspirants’ monthly incomes and current affordability to repay the loan.

You may think that the interest rates will be higher. Still, there is a way to get rid of it. You can calm down the loan rates by pledging an asset to secure the loan money. During the default or missing repayments, the lender can repossess that asset from you.

Therefore, as the lender has your assets, it can grant you a loan at a cheaper interest rate.

• Accessible with guaranteed approval

There have been rules and regulations imposed by the concerned financial authority of the UK, particularly on the guaranteed approval. According to it, the lender can only promise guaranteed loan acceptance once and if the borrower can afford the loan and its interest rate. There is another reality or perhaps the surprise for aspirants to get almost the guaranteed acceptance.

There is a possibility. Here, we are talking about the concept of affordable loans. No matter if you are obtaining larger funding, the lender will give you an affordable amount to borrow. If you show them your affordability, you will get long-term loans with guaranteed approval.

• Loans may be possible with no credit check

When you indulge in the loan process, your application will go through the mandatory credit check. Lenders do this to confirm the loan deal and its amount according to the affordability of the borrowers. There are two types of credit checks: hard credit checks and soft credit score checks.

A hard credit check often proves an obstacle in the way of getting loan approval, and it leaves a search footprint in the credit profile.

A soft credit check is comparatively easy and may not impact too much on someone’s credit profile. Most direct lenders pursue this policy, and sometimes, they may agree on long-term loans with no credit check. It happens only when someone has done exceptionally well in clearing all payments on time.

• A funding opportunity for start-ups but with no collateral

Perhaps everyone knows that long-term loans are suitable for businesses, particularly start-ups. They can put collateral and get the loan approval straightaway. However, what happens when someone has no collateral to put in but needs a significant amount for the start-up? You may think that loan rejection will be the outcome. It may happen, especially if you have a poor credit score. Wait! There is a surprise for you.

Some direct lenders in the UK are available with specialised deals for various businesses where they do not need to put collateral, i.e. unsecured business loans. However, the interest rates will go up significantly. Still, you at least remain free from providing loan collateral. Besides, your past credit history does not make any impact.

Conclusion

In a nutshell, long-term loans, particularly for bad credit situations, are an excellent source to borrow larger funding on manageable terms. However, they may surprise you in different points, which we have discussed above, but in a positive manner.

Besides that, choosing the appropriate lending firm is also important. You should do in-depth research on the loan marketplace and then come to the final decision.