Unsecured Personal Loans
Personal unsecured loans can often be a quick and easy way to get some cash. Whether you are looking to consolidate your debts, make some home improvements or need a loan for a holiday, there are numerous companies (up to 70) offering personal loans.
From high street banks and building societies to online banks and supermarkets, the choice of personal loan providers is vast. Moreover, it is quite common for lenders to offer different APRs depending on how the customer made the application (i.e. telephone applications versus online applications) so it is important that you search the market place before applying for your personal loan.
With personal unsecured loans, you are often restricted to how much you can borrow. Usually £25,000 would be the maximum that a lender would provide to a borrower on an unsecured basis. This is due to the fact that the loan is not secured against any of your assets and thus the lender takes a risk in providing you with the personal loan. It is also for this reason that often the annual percentage rates (APR) on personal loans are higher than with secured loans. However, the determining factor for the exact APR that you are provided with is your credit rating. The worse your credit rating, the higher your APR is likely to be. Furthermore, certain lenders will only give personal loans to people that fall within a certain credit score bracket. Therefore, there are different types of unsecured lenders that cater for different credit ratings. These are prime lenders (for good credit rating customers) and subprime lenders (for people with bad credit ratings).
Whilst it is important that you always search the marketplace for the best deal, ask yourself as well if you really do need a loan. Don’t forget that when you borrow more money, you are putting yourself in more debt. This is particularly important if you are looking to consolidate or clear your debts. People often forget that when they consolidate their debts into one lower monthly payment that they aren’t actually clearing their debt but rather adding to it! Always consider your options before you apply and make sure that a loan is really what you need. Often speaking to a financial advisor can help as they understand the pros and cons of all products and what is going on in the market place. For example, if debt consolidation and clearing your debts is your aim, a debt management plan or individual voluntary arrangement may be a better solution. Obviously this is not always the case, but at least look at the various options available to you.
Some unsecured personal loan lenders include HSBC, Barclays, RBS, Welcome Finance, Provident, London Scottish, Central Capital, Tescos, Smile and Mint to name but a few.
Personal loans are available over a number of different repayment terms which are dependent upon the loan amount and loan purpose and are repayable on a monthly basis. When comparing loans, a good starting point is the APR. This can be fixed (stays constant for the term of the loan even if there is a change in the bank base rate) or variable (this will fluctuate in line with any changes to the bank base rate – it can rise and fall). Also, take a look at the small print as often additional costs can be hidden there.
Personal loans are governed by the consumer credit act 1974 so always make sure that the lender or broker you get your loan from is fully licensed.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
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