Unsecured loans

Unsecured loan. Looking for a great rate unsecured loan? We'll show you how to search the UK market to get the right unsecured loan for you. Unsecured loans are loans in which the lender is assuming that you are going to be good for the money you have borrowed. When you borrow using unsecured loans you are not offering any security, guarantee or collateral to the lender. It is for this reason that the interest rate charged on unsecured loans tends to be higher than the interest rates offered on secured loans.

Looking for unsecured loans

Although unsecured loans may be more expensive, they may still make sense depending on how much money you want to borrow and how long you want to borrow it for. You may also be unwilling to use your property as collateral for a secured loan (it is very rare for individual borrowers to use anything other than their home as security for a secured loan).

Most lenders offering unsecured loans operate risk-based pricing on their loans. What this means is that they advertise a typical APR - an interest rate that at least 66% of those people who are accepted as borrowers will be offered. However, this might not be the rate you will be offered for your unsecured loan. What unsecured loans may cost you is going to depend, in large part, on lenders' views of your credit record. However, the interest rate you are offered, whatever it may be, will be a fixed rate so you will know exactly what your unsecured loan is going to cost you every month for the lifetime of the loan.

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You may borrow almost any amount between £500 and £25,000 through unsecured loans although some lenders limit the amount they are willing to offer on an unsecured basis to no more than £15,000 while others will not lend less than £1,000 in an unsecured loan.

You may also, within limits, stipulate the repayment term for any unsecured loans. Minimum and maximum unsecured loan repayment terms vary from lender to lender but between 12 months and ten years is not unusual.

If you are comparing unsecured loans with a view to borrowing money, you should be aware that you are more likely to be successful in arranging an unsecured loan if you have a good credit history and you can realistically afford the monthly repayments.

Unsecured loans may be used for almost any purpose a holiday, a new car, home improvements, clearing your credit cards, etc., although some lenders may impose restrictions. Applying for an unsecured loan is a much simpler process than applying for a secured loan and you should receive a decision from your prospective lender fairly swiftly once you have applied.

When you decide to take out any unsecured loans you need to do your own homework first. You must be clear how much you need to borrow and whether you can afford it do your own budget sums. You should also keep your loan term as short as you can so as to reduce the cost of the loan to you in interest charges the longer you borrow money for, the more interest you'll pay.

Last Updated: May 2007 © Moneyextra.com

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