Unsecured Loan

Unsecured loans are personal loans without security in which the lender has no claim on a home owner's property should they default on repayments. Instead, the lender relies solely on the ability of a borrower to make their agreed repayments usually by direct debit. As a result, the limit on unsecured loans is substantially lower than their secured counterparts, typically £25,000 maximum. Repayment periods range from anywhere between 6 months and 10 years. Unsecured loans are usually offered by traditional financial institutions like banks and building societies, and more recently by the larger supermarket chains.

The interest charged on unsecured loans can either be fixed or variable and is expressed as an APR (Annual Percentage Rate). APRs vary depending upon the loan amount and term. The rate is most commonly fixed on loan repayments and will remain the same throughout the period of the loan. Where the term is long, the interest may alternatively be variable so it important to establish and understand the terms of the loan agreement before committing.