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An unsecured loan is what it says, a loan 'not secured' on your property, that you can use as you would like. People often use them to buy a car, a dream holiday, home improvements, or even to clear costly credit card debts at one time, thus freeing you to extend the installments over a longer term with a reduced interest rate.
With an unsecured loan, how much can I borrow?
You can generally take out an unsecured loan for up to £15,000 (if you have a good credit rating) however, some unsecured lenders can offer you as much as £25,000 unsecured (if you have an EXCELLENT credit record). Nevertheless, keep in mind that you are required to have the financial means to make the loan instalments. With unsecured loan companies, you can normally be approved in principle over the phone.
What are the maximum and minimum repayment periods for an unsecured loan?
This partly is determined by the unsecured loan company. A number of unsecured loan companies will provide an unsecured loan for as little as twelve months, however, a 5 to 7 year term is more common. The maximum unsecured loan term is generally seven years but a number of unsecured lenders will loan over 10 years. Unsecured loans are more suitable for people who want to pay back something within a few years. For those who only want the money for a period of, say, six months, borrowing from a credit card may make more sense. In the event you found this article because you misspelt your search term with spellings such as 'best unsecure loans', '30 000 loan' or even 'bad credit insecured loan', don't panic since the info herein will prove useful.
How does an unsecured loan interest rate operate?
Unsecured loan interest rates are usually fixed for the duration of the unsecured lending agreement, which means you know specifically how much you will have to pay back each month. The disadvantage is that you could pay more than other borrowers who get a similar unsecured loan amount in 6 months' time - then again, you may very well pay less! Either way, you have no need to be anxious about unsecured loan repayments shooting up. Some unsecured lenders will require that you arrange a direct debit for the loan instalments. Typically, the rate of interest is lower when you borrow a bigger unsecured loan amount. With unsecured loans, the essential point to be aware of is the Annual Percentage Rate (APR). In addition, it is important to be aware of the amount the unsecured loan will cost you in total.
Do unsecured loan applications include a credit score check?
Yes, unsecured loan companies have to ensure that applicants represent a 'good risk' and therefore don't carry a past of bad credit and overdue debts. To ensure this, the unsecured loan company will request your credit history from a credit reference agency - Equifax, Experian and CallCredit plc. An impaired credit record will not automatically preclude you from getting an unsecured loan, nonetheless, chances are you will have to pay a higher unsecured loan interest rate. You may find it harder to obtain a personal unsecured loan if you are a sole trader or are on a short-term contract.
What is an unsecured loan protection insurance?
This is an insurance plan you can take out to pay (under certain conditions) the monthly repayments of the loan in the event you are incapable of doing so - 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 frequently expensive and if your financial circumstances are precarious, is it prudent to be borrowing more money anyway? If you decide that you do need a loan payment protection plan, look into exclusions and small print which could make it difficult for you to benefit from the cover.
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