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An unsecured loan is precisely what it suggests, a loan 'not secured' on your property, for you to use as you want. People often use them to purchase a new car, a special holiday, house renovations, or maybe to settle spiralling credit card bills in a single go, so allowing you to make the reimbursements over a longer period with a lower interest charge.
With an unsecured loan, how much money can I borrow?
You can typically get a personal unsecured loan for up to £15,000 (if you have a good credit record) but some unsecured loan companies can offer you up to £25,000 unsecured (if you have an EXCELLENT credit rating). Nevertheless, keep in mind that you should have the financial means to make the monthly loan repayments. With unsecured lenders, you can often be approved in principle over the telephone.
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What are the maximum & minimum repayment terms for an unsecured loan?
In part this is up to the unsecured loan provider. A number of unsecured loan companies can grant an unsecured loan for as little as one year, although a 5 to 7 year term is more common. The maximum unsecured loan length is generally seven years but certain unsecured lenders will advance an unsecured loan over 10 years. Unsecured loans are more suitable for applicants who want to repay the money borrowed over a few years. If you simply need the money over, say, six months, borrowing from a credit card may be cheaper.
How does the unsecured interest rate work?
Unsecured loan APRs are usually fixed for the length of the unsecured lending agreement, which means you know specifically the amount you will repay every month. The drawback is that you might pay more than people who get a similar unsecured loan amount in six months' time - on the other hand, you could pay less! Either way, you will not have to worry about you unsecured loan instalments shooting up. Some unsecured loan companies will insist that you take out a direct debit for the loan payments. Usually, the rate of interest is less when you borrow a larger unsecured loan. With unsecured loans, the most important factor to look for is the Annual Percentage Rate (APR). It's also essential to be aware of the amount the unsecured loan will cost you in total.
Do unsecured loans include a credit score check?
Yes, unsecured lenders need to make sure that borrowers are an 'acceptable risk' and therefore don't carry a past of credit problems and neglected debts. To do this, the unsecured loan company will obtain your credit record from a credit reference agency - CallCredit plc, Equifax or Experian. A poor credit history will not automatically hinder you from obtaining an unsecured personal loan nonetheless, you will most likely get an offer with an increased rate of interest. You might find it more difficult to get approved for a personal unsecured loan when you are self employed or have a temporary employment agreement.
What is an unsecured loan protection insurance?
This is an insurance you can get to pay (under certain conditions) the unsecured loan monthly repayments in the situation where you cannot - for instance, when you have lost your job. Consider with care if you really require this. Unsecured loan payment protection insurance (a bundle with the loan) is often costly and if your financial situation is unsteady, is it wise to be increasing your debt load anyway? If you decide that you do need a loan payment protection plan, enquire about exclusions and small print which could make it impossible for you to benefit from the plan.
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