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Due to the fact that an unsecured loan does not use any of your home for security (unlike a secured loan where, if you fail to keep up your loan repayments, lenders could legally sell your home), it makes it a popular choice for people looking for a loan. In contrast to secured lending, unsecured loans do not use collateral such as your property to ensure repayment to the loan company.
On the other hand, because this is a riskier proposition for the loan company, with some unsecured lending, unsecured lenders could apply somewhat higher interest rates than secured loan lenders would.
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Unsecured loan products tend to be suitable for people who don't want to borrow large amounts - typically an unsecured loan might reach as far as £25,000, but each lender has their own limit as to how much they will allow you to borrow.
Just like secured loans, they can be used for almost anything (with some restrictions) and you can decide on the amount of time you need to repay the loan. Generally, the period to pay back the loan will be quite flexible, between 6 -120 months, so it is essential to carefully estimate first to see how much you can comfortably afford to repay every month.
Due to differing lending criterias when applying for an unsecured versus a secured loan, you could find it harder to get an unsecured loan. However, often there are willing unsecured lenders who will help you in your efforts to acquire an unsecured loan.
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