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An unsecured loan is precisely what it suggests, a loan 'not secured' on your property, that you can use as you would like. Many people use them to pay for a new car, a dream holiday, house renovations, or possibly to pay off costly credit card bills in one go, therefore letting you to stretch the instalments over a longer term at a lower interest charge.
With an unsecured loan, how much is it possible to borrow?
You can usually take out a personal unsecured loan for up to £15,000 (if you have a good credit rating) but a number of unsecured lenders can offer you as much as £25,000 unsecured (if you have an EXCELLENT credit history). However, remember that you are required to have the income to meet the loan instalments. With unsecured loans, you can normally be approved in principle over the phone.
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What are the min/max repayment periods for an unsecured loan?
This partly depends on the unsecured loan provider. A number of unsecured loan companies can provide an unsecured loan for as little as one year, although a 5 to 7 year term is more usual. The maximum unsecured loan term is usually seven years but certain unsecured lenders will loan over 10 years. Unsecured loans are suitable for those who want to pay back something within a few years. For people who only want the money for a short period, for example, six months, using a credit card may make more sense.
How does the unsecured interest rate work?
Unsecured loan rates are generally fixed for the whole term of the unsecured loan agreement, which means you know specifically the amount you will pay back each month. The disadvantage is that you could repay more than people who borrow a similar unsecured loan in six months' time - on the other hand, you may very well pay less! Either way, you will not need to be anxious about loan repayments increasing. Many unsecured loan companies will request that you set up a direct debit for the loan instalments. Generally, the rate of interest is less when you take out a larger unsecured loan amount. With unsecured loans, the most significant factor to look for is the Annual Percentage Rate (APR). It's also essential to be aware of the amount the unsecured loan will cost you in total.
Will there be a credit history check?
Yes, unsecured loan companies need to be certain that applicants represent a 'low risk' and therefore do not have a record of adverse credit and neglected debts. To accomplish this, the unsecured loan provider will obtain your credit record from a credit reference agency - Experian, CallCredit plc or Equifax. A bad credit past will not automatically hinder you from obtaining an unsecured loan, nevertheless, chances are you will get an offer with an increased rate of interest. You might find it harder to get a personal unsecured loan if you are a sole trader or if you are just starting a new employment contract.
What is an unsecured loan insurance ?
This is an insurance plan you can buy to pay for (under certain conditions) the unsecured loan monthly payments if you are unable to - for instance, when you have lost your job. Consider carefully if this is actually necessary. Unsecured loan payment protection insurance (a bundle with the loan) is frequently costly and if your financial circumstances are unstable, is it wise to be going further into debt anyway? If you would rather have a payment protection insurance, look into exclusions and small print which could make it difficult for you to benefit from the plan.
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