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A personal unsecured loan is precisely what it suggests, a loan 'not secured' on your property, for you to use as you would like. People tend to use them to get a new car, a special holiday, house renovations, or even to clear crippling credit card bills in a single go, thus letting you to stretch the instalments over a longer period with a smaller APR.
With an unsecured loan, how much is it possible to borrow?
You can usually get a personal unsecured loan for up to £15,000 (if you have a good credit record) however, certain unsecured loan companies can give you up to £25,000 unsecured (if you have an EXCELLENT credit record). Nonetheless, keep in mind that you have to be able to afford every loan repayment. With unsecured loan companies, you can normally 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 depends on the unsecured lender. Some unsecured loan companies could offer an unsecured loan for as little as one year, although a 5 to 7 year term is more likely. The maximum unsecured loan length is typically 7 years but some unsecured loan companies will loan over 10 years. Unsecured loans are best for people who want to repay the loan within a few years. For those who only want the money for a short period, for instance, 6 months, borrowing from your 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 contract, which means you know specifically the amount you must pay back per month. The disadvantage is that you could potentially repay more than other borrowers who get a similar unsecured loan in 6 months' time - then again, you may very well pay less! Either way, you do not have to be concerned about you unsecured loan instalments escalating. Many unsecured lenders will insist that you set up a direct debit for the loan payments. Typically, the loan interest charge is smaller when you borrow a larger unsecured loan. With unsecured loans, the critical point to look for is the Annual Percentage Rate (APR). Additionally, it's advisable to know the amount the unsecured loan will cost you in total.
Will there be a credit history check?
Yes, unsecured loan providers need to ensure that borrowers are a 'good risk' and therefore do not have a past of bad credit and unpaid debts. To do this, the unsecured loan provider will get your credit file from a credit reference agency - Equifax, Experian and CallCredit plc. A bad credit record will not automatically stop you from getting an unsecured loan, however, you will probably be charged a higher level of loan interest rate. You may find it more difficult to get a personal unsecured loan if you are a contractor or are on a short-term contract.
What is an unsecured loan protection insurance?
This is an insurance you can get to pay (under certain conditions) the monthly loan repayments in the situation where you are incapable of doing so - for example, if you've lost your job. Consider 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 uncertain, is it wise to be going further into debt anyway? If you would rather have a payment protection insurance, check out the exclusions and small print which could make it impossible for you to benefit from the insurance.
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