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A personal unsecured loan is what it says, a loan 'not secured' on your assets, for you to spend as you want. People tend to use them to get a new car, a dream holiday, home improvements, or even to settle crippling credit card bills at one time, thus allowing you to spread the payments over a longer time with a reduced interest charge.
With an unsecured loan, what amount can I borrow?
You can normally take out a personal unsecured loan for up to £15,000 (if you have a good credit rating) however, a number of unsecured lenders can grant you up to £25,000 unsecured (if you have an EXCELLENT credit rating). However, bear in mind that you are required to have the income to make the loan repayments. With unsecured lenders, you can normally be approved in principle over the telephone.
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What are the min/max repayment periods for an unsecured loan?
This partly depends on the unsecured loan company. A number of unsecured loan companies can offer an unsecured loan for as little as one year, although a 5 to 7 year term is more frequent. The maximum unsecured loan length is generally seven years but a number of unsecured loan companies will lend over 10 years. Unsecured loans make most sense for borrowers who want to pay back something over a few years. If you only want the money for a period of, for instance, six months, purchasing with your credit card may make more sense.
How does an unsecured loan interest rate operate?
Unsecured loan rates are normally fixed for the length of the unsecured loan contract, which means you know precisely the amount you must repay per month. The disadvantage is that you might pay more than borrowers who borrow a similar unsecured loan amount in six months' time - then again, you could pay less! Either way, you will not have to be anxious about your loan instalments shooting up. Some unsecured loan providers will request that you set up a direct debit for the loan payments. Generally, the loan interest rate is smaller when you borrow a bigger unsecured loan amount. With unsecured loans, the crucial point to check out is the Annual Percentage Rate (APR). Additionally, it's advisable to be aware of the amount the unsecured loan will cost you in total.
Do unsecured loan applications include a credit check?
Yes, unsecured lenders need to be certain that you represent a 'low risk' and therefore don't carry a past of poor credit and outstanding debts. To achieve this, the unsecured loan provider will request your credit record from a credit reference agency - Experian, CallCredit plc or Equifax. A bad credit record won't inevitably hinder you from obtaining an unsecured loan, nonetheless, chances are you will be given an increased unsecured loan interest rate. You may find it harder to obtain an unsecured personal loan if you are self-employed or have a temporary employment agreement.
What is an unsecured loan payment protection insurance?
This is an insurance plan you can take out to pay for (under certain conditions) the unsecured loan monthly repayments if you are incapable of doing so - for instance, if you have lost your job. Evaluate carefully if this is actually necessary. Unsecured loan payment protection insurance (a bundle with the loan) is often costly and if your financial circumstances are unstable, is it wise to be extending your debt burden on top of it all? If you do want a loan payment protection plan, look into exclusions and small print which could make it harder for you to claim from the plan.
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