Unsecured loans online UK - interest and credit ratings

An unsecured loan is a personal loan where the amount you borrow is not secured against your UK property, or any other asset. The amount you are able to have access to can start from as little as £500, and more often than not can be paid back over a term of anywhere between six months and ten years.

Because you not securing the money you are borrowing, lenders tend to limit the value of unsecured loans to £25,000, however you may find that some loan providers may offer you more, perhaps if you already bank with them or have taken out a loan with them before and have always paid money back on time.

You will probably find that lenders charge a higher rate of interest on unsecured loans than they would do if you were taking out a secured loan (where the loan is secured against your home). This is because they have no guarantee that you can repay the loan, and therefore charge you more in interest to cover the cost of insurance policies that they need to take out to protect them should you default on repayments.

The amount you borrow usually starts at £500. If you require less than this, it might be worth talking to your bank manager about a taking out a small loan or perhaps simply increasing your overdraft. The repayment term (the length of time over which you repay the loan) can be anything from six months to ten years, and the duration that is applied to your loan is really your decision but smaller-sized loans may not be available for a term in excess of five years. If you are going to repay the loan over a long period of time, bear in mind that the longer you take to repay it, the more you will pay back in interest.

The best way to work out how much you are going to be paying is to look at the interest rate that the company advertises. Lenders are obliged by law to tell you how much they charge for this type of finance and this is worked out as an annual percentage rate (APR).

For USA visitors please see our advice on unsecured loans on our sister site Guide4Home.

© The Pink Fridge Online Magazine 2008 - Unsecured Loans