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Guide to the UK unsecured
loan market.
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Unsecured Loans Guide
Compare unsecured loans >>
An unsecured loan isn’t secured against any of your assets, and is therefore considered a high risk by lending institutions.
Lenders will need to see evidence of a sound credit history and sufficient earnings to repay the loan before they enter into an agreement.
Ok. So how could an unsecured loan be advantageous to me?
Not everyone has a foothold on the property ladder; therefore unsecured loans exist to give those who don’t own properties the chance to take out a loan.
Remove the endless security measures associated with arranging secured loans, and taking out an unsecured loan can be a relatively simple process, with funds made available within 24 hours in some cases.
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Very good! Is there anything I need to look out for?
Absolutely, check all the terms and condition with a fine-toothed comb before entering into an agreement.
The lenders’ terms of the loan will reflect the high risk nature of unsecured loans, and characteristically will allow lesser amounts to be borrowed at a higher rate of interest than most secured loans. Interest rates on unsecured loans can be exorbitant in the extreme, so shop around.
The size of an unsecured loan will generally be smaller than that of a secured loan. As a result, the repayment duration of the loan will often be shorter, usually no longer than 5 or 10 years.
Just because your home is not at risk, don’t take unsecured loans lightly. You should always ensure that payment deadlines are met, because whether secured or unsecured, court proceedings will still be brought against you if you fail to keep up with repayments on the loan.
As with all loans, ask yourself if you really need to borrow this money before you sign an agreement.
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Can I pay this loan back early if I so wish?
You can, but you’ll be liable to paying what’s known as a ‘redemption penalty’
Effectively, you’ve lost the lender money in missed interest repayments, and they will penalise you for this. Check the magnitude of any redemption penalties before signing the agreement; some can be quite considerable.
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I really need this loan, so who do you recommend I talk to?
Use the creditchoices loans calculator to finesse your search and find a tailored loan that suits your needs.
The Moneyback Bank (www.moneybackbank.co.uk) are the folks to talk to. They’re currently offering an unsecured loan with a typical APR of 8.4%, one of the lowest rates on the market. Were you to take out an unsecured loan of £5000 with Moneyback, over the course of 3 years you would pay £673.82 in interest. Moneyback can also provide you with an instant online decision.
Other competitive unsecured loans on the market include the Alliance and Leicester personal loan (www.alliance-leicester.co.uk), Abbeyloan (www.abbey.com) and Bradford and Bingley personal loan (www.bradfordandbingley.co.uk).
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