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What is an Unsecured Loan?

What is an Unsecured Loan?
Unsecured Loan Pros and Cons
Unsecured Loan FAQs

What is an Unsecured Loan?

An Unsecured Loan is a loan obtained without any security. An agreement is setup between the debtor and creditor to repay the funds over a set period of time. The simplest form of unsecured loan would be from a family member or friend, with an I.O.U as an agreement. This is sometimes a much better option than borrowing from a high street lender as it is a less formal arrangement.

Unlike a Secured Loan, an unsecured loan requires no property or asset as security. It is therefore considered as a more risky option for lenders so a more stringent form of criteria is involved. A good credit history is a must along with regular earnings to enable you to meet the loan repayments.

What can I use an Unsecured Loan for?

You can use a Unsecured Loan for a variety of purposes such as home improvements, going on holiday, Debt Management or Debt Consolidation.

Where can I get one?

You can obtain an unsecured loan from most of the high street banks, building society or lenders, although their criteria is considered much more specific. There are some borrowers that specialise in loans for bad credit ratings that can incorporate people who have CCJ’s, mortgage arrears or just a general bad credit history. There are also companies that specialise in supplying loans for people who are self employed, company directors, tenants or students.

How much can I get?

How much you can borrow as unsecured varies depending on your credit history and circumstances. On average, a person with a good credit rating can usually obtain up to £15,000 or in good circumstances up to £25,000. Any more than this and you would have to apply for a secured loan.

Unsecured Loans monthly payment

As the size of loan is generally smaller than an secured loan the term will be shorter, usually from 1 to 10 years.

Pay Day Loans

Payday Loans are a good option for those who are struggling to get to the end of the month on the money they have spare. If approved, you can usually borrow up to £1,000 for up to 30 days without any major credit checks or searches. Getting the cash can be relatively quick depending on the Payday loans lender, sometimes within 15 minutes. Be sure to check the interest rates thought as some lenders charge a astronomical fee for this. Find a website that has a Payday loans calculator so you can see how much it will cost you before you sign up to anything. The Payday loans market is regulated by the Financial Services Authority so if you have any issues regarding your loan contact them immediately.

Debt Consolidation option

Unsecured loans can be useful if you have racked up a large amount of debt on your credit cards. Credit card debts can sometimes spiral out of control due to the high interest rates and can take longer to pay off. The typical APR for a credit card averages between 18% and 29% where as you could pick up an unsecured loan for as little as 6.9% depending on the market. This could save you a packet over time and is definitely a better option than a Bad Credit Loan.

In some cases you can have you money in your account within minutes on approval from your lender. This is typically the case if you have applied online through your own banks website. If you apply for a loan with a lender other than your bank it can take from 7 to 14 days to process, usually depending on how fast you return the necessary paperwork to your lender.

Professional Help
If you would like more information on Unsecured Loans or would like to apply for one give the UK Debt Advisor a call on 0800 987 5337 or use our free call back form.