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Unsecured Personal Loans
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What is an Unsecured Personal Loan?
An unsecured personal loan is a way of borrowing a lump sum of money from a bank or building society. You don't need to put up any property as security for the loan. You can use the money for whatever you want (but not for commercial purposes), but unsecured loans are commonly used for buying cars or to fund home improvements.
You can choose over how long you want to repay the loan. The minimum period is usually 1 year, and the maximum is generally between 5 and 7 years, although some providers allow longer than this. You need to meet a regular monthly repayment throughout this time.
Who are they suitable for?
- Unsecured personal loans are for people who want to borrow between £1000 and £25,000, and who don't want to run the risk of securing their home against the debt.
- Interest on unsecured personal loans tends to be fixed at the outset so you can budget precisely what your repayments will be throughout the loan term.
- Unsecured Car Loans work the same way, but specifically to fund the purchase of a car. These can come with incentives such as breakdown insurance or money off car parts.
What should you look
out for?
Unsecured personal loans are fairly straightforward, but
there are a number of catches and things you need to understand before you
commit yourself. These include:
- A lender may advertise a loan with deferred repayments. This means that you don't make any repayments for a few months at the start of the loan. However, interest is still rolling up and your future repayments will be larger to compensate. Your total amount repayable will be larger too. The same applies to loans with ‘payment breaks' during the loan term.
- You can get funds sent to your bank account on the same day as applying. You'll have to pay a fee for the privilege, so ask yourself ‘do I really need it today?'
If an unsecured personal loan isn't for you, we've got
guides and best buy tables for secured personal loans too.
What to do next
Take a look at the latest personal loans best buys to
check the latest rates and deals on offer.
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