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This section answers What is an Unsecured Loan? and allows you to compare loans using our loan comparison tables. If you have your eye on a new coupe and need a car loan to finance it or have spotted an engagement ring for that special someone – then an unsecured loan is probably for you. Alternatively, unsecured loans can be used to consolidate debt into one manageable repayment. More...
An unsecured loan has no guarantee made against it as surety for the amount borrowed, such as property. The lender will consider your loan application based on your ability to make the monthly repayments and based on your personal circumstances.
The rate charged on your loan will depend on the amount you borrow. As a rule, larger amounts attract a lower interest rate.
There are two main categories of unsecured loans.
Fixed loans are most common as the money borrowed and total interest is divided evenly over the loan term. This enables you to plan how much you can afford to pay back each month. Also, where interest rates tend to fluctuate, with a fixed personal loan your repayments will remain the same.
Flexible loans are not as common with either borrowers or lenders. A flexible loan is so designed that you can withdraw as much as you need (within an agreed limit) and only pay the interest on that amount.
This type of loan often suits people embarking on major projects such as building work. Loans of this nature can as the name suggests, allow flexible repayments but often stipulate that a minimum amount be paid per month.
Under an unsecured loan, you will be able to borrow £1,000 to £25,000 over a period of one to 5 years. Based on your income you shall be able to determine the amount you borrow, the period over which you borrow it and therefore set the monthly repayments at a level which suits you.
The interest rate to consider is the Annual Percentage Rate (APR). This can determine the interest rate over the term of the loan allowing you to gauge the more realistic level at which you will be repaying the amount borrowed. Try not to make assumptions based on the APR rate. For example, does the APR include things like credit insurance and if so, on which type of loan?
Based on a repayment loan, which is usually the case, your monthly instalments will go towards:
1. servicing the loan;
2. paying interest;
3. paying off part of the capital sum to reduce the outstanding debt.
There are a wide range of unsecured loan providers on the market, each with different lending criteria and offering a different interest rate. Only those with a good credit history are likely to receive the best rate a lender is willing to provide. Compare cheap unsecured loans but find out what interest rate will apply to you – don’t assume it is the one they have in the window. Use our a-z directory a-z directory and find the best unsecured loans in the UK.
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