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An unsecured loan means exactly what it says, a loan 'not secured' on your property, for you to spend as you would like. A lot of people use them to purchase a new car, a special holiday, home improvements, or maybe to clear spiralling credit card bills in one go, so freeing you to make the payments over a longer period with a reduced interest charge.
With an unsecured loan, how much can I borrow?
You can generally get a personal unsecured loan for up to £15,000 (if you have a good credit record) however, a number of unsecured lenders can grant you up to £25,000 unsecured (if you have an EXCELLENT credit rating). However, remember that you should have the available income to make the monthly loan repayments. With unsecured loan products, you can often get approval in principle over the phone.
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What are the min/max repayment periods for an unsecured loan?
In part this depends on the unsecured loan company. Some unsecured loan companies will offer an unsecured loan for as little as 1 year, however, a 5 to 7 year term is more usual. The maximum unsecured loan length is usually seven years but some unsecured loan companies will advance an unsecured loan over 10 years. Unsecured loans are more suitable for people who want to pay back something within a few years. If you only want the money over, for example, 6 months, borrowing from your credit card may make more sense.
How does an unsecured loan interest rate operate?
Unsecured loan APRs are generally fixed for the length of the unsecured lending agreement, which means you know precisely how much you will pay back every month. The drawback is that you could repay more than others who are offered a similar unsecured loan in six months' time - on the other hand, you might pay less! Either way, you do not have to worry about you unsecured loan instalments increasing. A lot of unsecured lenders will insist that you set up a direct debit for the loan payments. Usually, the loan interest charge is lower if you borrow a bigger unsecured loan. With an unsecured loan, the key element to check out is the Annual Percentage Rate (APR). In addition, it is essential to know how much the unsecured loan will cost you in total.
Will there be a credit score check?
Yes, unsecured lenders want to be certain that applicants represent a 'low risk' and therefore do not have a past of bad credit and overdue debts. To do this, the unsecured loan provider will get your credit history from a credit reference agency - Experian, CallCredit plc or Equifax. A bad credit past will not automatically preclude you from getting a personal unsecured loan, however, you will most likely be charged a higher level of loan interest rate. You might find it more difficult to get approved for an unsecured loan if you are a contractor or are on a short-term contract.
What is an unsecured loan protection insurance?
This is an insurance you can get to pay (under certain conditions) the unsecured loan monthly payments if you cannot - for example, when you have lost your job. Think carefully if you genuinely need this. Unsecured loan payment protection insurance (a bundle with the loan) is frequently expensive and if your financial situation is unsteady, is it prudent to be going further into debt on top of it all? If you do need a loan payment protection plan, enquire about exclusions and small print which could make it difficult for you to benefit from the policy.
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