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An unsecured loan is precisely what it suggests, a loan 'not secured' on your home, for you to spend as you want. Many people use them to buy a new car, a special holiday, house renovations, or maybe to settle crippling credit card debts at one time, therefore giving you freedom to extend the reimbursements over a longer period with a smaller interest rate.
With an unsecured loan, how much can I borrow?
You can generally get an unsecured loan for up to £15,000 (if you have a good credit record) however, some unsecured lenders can give you as much as £25,000 unsecured (if you have an EXCELLENT credit rating). Then again, bear in mind that you are required to be able to afford the monthly loan repayments. With unsecured loan companies, you can often get approval in principle over the phone.
What are the maximum & minimum repayment terms for an unsecured loan?
In part this is up to the unsecured loan provider. Some unsecured lenders will provide an unsecured loan for as little as 1 year, though a 5 to 7 year term is more frequent. The maximum unsecured loan length is generally seven years but certain unsecured lenders will advance an unsecured loan over 10 years. Unsecured loans are more suitable for borrowers who want to repay a purchase within a few years. If you simply need the money for a period of, for instance, six months, borrowing from a credit card may be more suitable.
How does the unsecured interest rate work?
Unsecured loan interest rates are generally fixed for the duration of the unsecured loan contract, which means you know specifically the amount you must pay back every month. The disadvantage is that you might possibly repay more than people who take out a similar unsecured loan in 6 months' time - then again, you may very well pay less! Either way, you will not have to be anxious about loan repayments soaring. Many unsecured lenders will request that you set up a direct debit for the loan instalments. Normally, the rate of interest is lower if you borrow a bigger unsecured loan amount. With unsecured loans, the critical point to be aware of is the Annual Percentage Rate (APR). It's also advisable to know how much the unsecured loan will cost you in total.
Do unsecured loans include a credit history check?
Yes, unsecured loan companies need to be certain that applicants represent a 'low risk' and therefore don't carry a history of bad credit and unpaid debts. To do this, the unsecured loan company will request your credit history from a credit reference agency - Experian, Equifax or CallCredit plc. An impaired credit history won't necessarily prevent you from getting an unsecured personal loan however, you will most likely be charged a higher level of loan interest rate. You may find it harder to obtain an unsecured loan when you are self employed or have a temporary employment agreement.
What is an unsecured loan protection insurance?
This is an insurance plan you can purchase to pay for (under certain conditions) the unsecured loan monthly payments in the situation where you are unable to - for instance, when you have lost your job. Evaluate carefully if this is actually necessary. Unsecured loan payment protection insurance (a bundle with the loan) is often expensive and if your financial circumstances are unsteady, is it prudent to be increasing your debt load anyway? If you do want a payment protection insurance, enquire about exclusions and small print which could make it hard for you to benefit from the insurance.
Author: Herman Porter has also written other insightful articles not just relevant to loan apr, but also other articles, related to crisis loans, forces loans and also ''.
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