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A personal unsecured loan means exactly what it says, a loan 'not secured' on your property, that you can spend as you would like. Many people use them to get a new car, a dream holiday, house renovations, or maybe to settle crippling credit card debts in a single go, thus letting you to stretch the repayments over a longer term at a lower APR.
With an unsecured loan, what amount can I borrow?
You can normally take out an unsecured personal loan for up to £15,000 (if you have a good credit rating) however, a number of unsecured lenders can grant you up to £25,000 unsecured (if you have an EXCELLENT credit record). Nonetheless, remember that you should have the financial capacity to meet the monthly loan repayments. With unsecured loans, you can often be approved in principle over the telephone.
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What are the maximum & minimum repayment terms for an unsecured loan?
This partly is determined by the unsecured loan provider. Some unsecured lenders will provide 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 certain unsecured loan companies will loan over 10 years. Unsecured loans are suitable for applicants who want to repay the loan over a few years. For those who only want the money over, for instance, 6 months, borrowing from a credit card may be more suitable.
How does an unsecured loan interest rate operate?
Unsecured loan interest rates are usually fixed for the whole term of the unsecured loan contract, which means you know specifically how much you will pay back each month. The disadvantage is that you might possibly repay more than borrowers who get a similar unsecured loan amount in 6 months' time - then again, you might pay less! Either way, you do not have to be anxious about unsecured loan repayments escalating. Many unsecured lenders will request that you arrange a direct debit for the loan payments. Generally, the loan interest rate is smaller if you take out a larger unsecured loan. With unsecured loans, the most important factor to look for is the Annual Percentage Rate (APR). Additionally, it's crucial to consider how much the unsecured loan will cost you in total.
Will there be a credit check?
Yes, unsecured loan providers need to be satisfied that loan applicants represent an 'acceptable risk' and therefore don't carry a history of credit problems and unpaid debts. To accomplish this, the unsecured loan provider will obtain your credit file from a credit reference agency - Experian, Equifax or CallCredit plc. An adverse credit history won't necessarily hinder you from obtaining an unsecured loan, however, in all probability you will be given an increased unsecured loan interest rate. You may find it more difficult to get approved for an unsecured loan if you are self-employed or are on a short-term contract.
What is an unsecured loan protection insurance?
This is an insurance cover you can take out to pay for (under certain conditions) the unsecured loan monthly repayments in the event you are incapable of doing so - for example, when you have lost your job. Think carefully if you really need this or not. Unsecured loan payment protection insurance (a bundle with the loan) is frequently costly and if your financial position is uncertain, is it wise to be extending your debt burden on top of it all? If you decide that you do need a loan payment protection plan, look into exclusions and small print which might make it hard for you to claim from the cover.
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