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A personal unsecured loan is what it says, a loan 'not secured' on your home, for you to use as you want. People often use them to get a new car, a special holiday, home improvements, or even to pay off costly credit card debts in one go, therefore giving you freedom to make the repayments over a longer period at a lower interest rate.
With an unsecured loan, how much money can I borrow?
You can typically get an unsecured personal loan for up to £15,000 (if you have a good credit record) but certain unsecured loan companies can give you as much as £25,000 unsecured (if you have an EXCELLENT credit history). However, don't forget that you are required to have the financial capacity to meet the monthly loan repayments. With unsecured lenders, you can often be approved in principle over the phone.
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What are the min/max repayment terms for an unsecured loan?
In part this is determined by the unsecured loan provider. Some unsecured loan companies can grant an unsecured loan for as little as one year, however, a 5 to 7 year term is more likely. The maximum unsecured loan term is generally seven years but a number of unsecured loan companies will advance an unsecured loan over 10 years. Unsecured loans are best for those who want to repay a purchase within a few years. For people who only need the money over, for example, six months, borrowing from your credit card may be cheaper.
How does the unsecured interest rate work?
Unsecured loan interest rates are generally fixed for the whole term of the unsecured loan agreement, which means you know exactly how much you are required to repay per month. The disadvantage is that you might possibly repay more than other borrowers who get a similar unsecured loan amount in 6 months' time - on the other hand, you may very well pay less! Either way, you will not need to be concerned about unsecured loan repayments increasing. A lot of unsecured lenders will request that you arrange a direct debit for the loan payments. Usually, the loan interest rate is smaller if you take out a bigger unsecured loan amount. With unsecured loans, the most significant point to be aware of is the Annual Percentage Rate (APR). In addition, it is crucial to consider the amount the unsecured loan will cost you in total.
Will I have to pass a credit check?
Yes, unsecured loan providers have to ensure that borrowers represent an 'acceptable risk' and therefore don't carry a history of adverse credit and outstanding debts. To do this, the unsecured loan provider will obtain your credit record from a credit reference agency - Experian, CallCredit plc or Equifax. An adverse credit record won't necessarily preclude you from obtaining an unsecured personal loan nevertheless, chances are you will be given an increased unsecured loan interest rate. You might find it harder to obtain an unsecured personal loan if you are a sole trader or if your employment status is temporary.
What is an unsecured loan insurance ?
This is an insurance policy you can get to pay for (under certain conditions) the unsecured loan monthly payments should your circumstances mean that you are unable to - for example, if you have lost your job. Evaluate carefully if this is actually necessary. Unsecured loan payment protection insurance (a bundle with the loan) is frequently costly and if your financial situation is uncertain, is it wise to be going further into debt on top of it all? If you would rather have a payment protection insurance, look into exclusions and small print which could make it harder for you to claim from the policy.
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