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An unsecured loan is what it says, a loan 'not secured' on your assets, for you to use as you would like. Many people use them to buy a new car, a special holiday, house renovations, or maybe to settle crippling credit card bills at one time, therefore letting you to spread the instalments over a longer time with a lower interest rate.
With an unsecured loan, how much money can I borrow?
You can typically take out a personal unsecured loan for up to £15,000 (if you have a good credit history) however, a number of unsecured lenders can give you as much as £25,000 unsecured (if you have an EXCELLENT credit record). Then again, keep in mind that you are required to have the available income to meet the loan instalments. With unsecured loan products, you can frequently get approval in principle over the telephone.
What are the min/max repayment terms for an unsecured loan?
This partly is determined by the unsecured loan provider. A number of unsecured lenders could give an unsecured loan for as little as 1 year, although a 5 to 7 year term is more usual. The maximum unsecured loan length is usually 7 years but certain unsecured lenders will advance an unsecured loan over 10 years. Unsecured loans make most sense for those who want to repay the money borrowed within a few years. If you only need the money for a short period, say, six months, purchasing with a credit card may be cheaper.
How does an unsecured loan interest rate operate?
Unsecured loan APRs are normally fixed for the length of the unsecured lending agreement, which means you know specifically the amount you are required to pay back monthly. The disadvantage is that you might possibly repay more than people who borrow 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 worry about unsecured loan repayments rising uncontrollably. Many unsecured loan companies will require that you arrange a direct debit for the loan instalments. Usually, the loan interest charge is less if you take out a larger unsecured loan amount. With unsecured loans, the most important factor to be aware of is the Annual Percentage Rate (APR). In addition, it is advisable to find out the amount the unsecured loan will cost you in total.
Do unsecured loans include a credit check?
Yes, unsecured loan companies want to be certain that loan applicants represent a 'low risk' and therefore do not have a history of credit problems and outstanding debts. To ensure this, the unsecured loan company will check your credit record from a credit reference agency - Equifax, Experian and CallCredit plc. A bad credit past won't necessarily stop you from obtaining an unsecured loan, nevertheless, you will probably be charged a higher level of loan interest rate. You might find it more difficult to get an unsecured personal loan if you are self-employed or if you are newly employed.
What is an unsecured loan payment protection 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. Evaluate with care whether this is actually necessary. Unsecured loan payment protection insurance (a bundle with the loan) is frequently expensive and if your financial situation is precarious, is it wise to be extending your debt burden on top of it all? Should you decide you do need a loan payment protection plan, look into exclusions and small print which could make it difficult for you to benefit from the plan.
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