Unsecured Loans
An unsecured loan is a loan that does not require the borrower to secure the debt against an asset, usually a property.
If you take out an unsecured loan, you are not using your home to guarantee your repayments. This means that the lender can not normally repossess your home if you fail to repay the loan.
Because you are not using your home to guarantee repayment of the unsecured loan , the loans company will take out extra insurance to cover any money lost should you default on your payments.
Unsecured loans - more
Lenders pass on the cost of this insurance by increasing the interest rate of the loan, which is why you tend to find that unsecured loans have a higher APR than secured loans.
Because you are not using your home to guarantee repayment of the unsecured loan , the loans company will take out extra insurance to cover any money lost should you default on your payments. Lenders pass on the cost of this insurance by increasing the interest rate of the loan, which is why you tend to find that unsecured loans have a higher APR than secured loans.
How much can I borrow?
Because you are not guaranteeing the loan against the value of your home, it is unlikely that you will be able to borrow huge amounts of money with an unsecured loan . You can usually apply to borrow anything from 500 to 25,000, but ultimately it is up to the loans company to decide how much they are willing to lend you.
How long have I got to pay the loan back?
Most lenders give you the option of paying the loan back within between six months and ten years. It's your decision how much or how little time you need to pay back the loan in full but you should try not to stretch yourself too much as the last thing you want is to default on repayments. Despite this, try to pay back enough each month so that the loan doesn't drag on for years and years, as this will mean you are paying back more interest, and therefore the loan will ultimately cost you more. You need to find a balance between what you can afford each month.
How much will I have to pay back in total?
Growing competition in the marketplace has brought down the average APR of unsecured personal loan over the past few years, so taking out a loan has become less expensive than it used to be.
