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An unsecured loan is precisely what it suggests, a loan 'not secured' on your assets, that you can use as you want. People tend to use them to pay for a new car, a special holiday, house renovations, or possibly to clear crippling credit card bills at one time, therefore giving you freedom to stretch the installments over a longer time with a smaller interest rate.
With an unsecured loan, how much can I borrow?
You can generally get an unsecured personal loan for up to £15,000 (if you have a good credit rating) but certain unsecured loan companies can give you up to £25,000 unsecured (if you have an EXCELLENT credit record). Nonetheless, don't forget that you should have the financial means to make every loan repayment. With unsecured loan companies, you can frequently get approval in principle over the telephone.
What are the min/max repayment terms for an unsecured loan?
In part this is determined by the unsecured loan company. A number of unsecured lenders would grant an unsecured loan for as little as 1 year, although a 5 to 7 year term is more frequent. The maximum unsecured loan length is typically 7 years but a number of unsecured lenders will lend over 10 years. Unsecured loans make most sense for applicants who want to pay back something within a few years. If you only need the money over, for instance, 6 months, borrowing from a credit card may be better. It may interest you to find out, as you read this insightful article, that many people make the error of typing 'business loans secure unsecure', 'best unsecred loans' or even 'cheapest unsecure loans' when trying to locate online content related to to this issue.
How does the unsecured interest rate work?
Unsecured loan rates are usually fixed for the length of the unsecured loan agreement, which means you know specifically how much you will pay back each month. The disadvantage is that you could potentially repay more than other borrowers who take out a similar unsecured loan amount in 6 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 companies will request that you arrange a direct debit for the loan instalments. Typically, the loan interest charge is smaller when you borrow a larger unsecured loan amount. With unsecured loans, the critical factor to note is the Annual Percentage Rate (APR). It's also important to know the amount the unsecured loan will cost you in total.
Will I have to pass a credit check?
Yes, unsecured loan providers need to be satisfied that applicants are a 'low risk' and therefore do not have a past of bad credit and unpaid debts. To achieve this, the unsecured loan company will obtain your credit history from a credit reference agency - Experian, Equifax or CallCredit plc. An adverse credit history will not automatically preclude you from obtaining an unsecured personal loan nevertheless, in all probability you will be charged a higher rate of interest. You may find it harder to obtain an unsecured loan if you are a contractor or if you are just starting in a new job.
What is an unsecured loan protection insurance?
This is an insurance policy you can buy to pay (under certain conditions) the monthly loan repayments should your circumstances mean that you cannot - for example, if you have lost your job. Think carefully if you really require this. Unsecured loan payment protection insurance (a bundle with the loan) is frequently costly and if your financial circumstances are uncertain, is it prudent to be extending your debt burden anyway? If you do need a loan payment protection plan, enquire about exclusions and small print which could make it hard for you to benefit from the insurance.
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