A personal loan and an unsecured loan are in-fact the same product! A personal loan is described as an “unsecured” personal loan as it allows you to borrow money without having to use any security, such as your car or home. What the lender will do to determine whether or not an unsecured loan is a viable option is to perform a credit search. And evaluate how high a ‘risk’ you are for the loan. This way the lender can look at your personal credit history and make their decision based on your credit rating.
Where personal loans are concerned, especially in today’s market, consumers have a variety of different products to choose from. Loans can be very flexible and diverse, depending on the amount and purpose of the loan; you will always be looking at different repayment terms and interest rates. If for example, you are looking to borrow £10,000 or more, the repayment term will usually be much longer, usually 5-7 years, than if you were to borrow for example £2,000.
The minimum loan amount available is usually a £1,000, however, there are many lenders who will lend as little as £250 to a customer. The maximum unsecured loans amount available in today’s market is now a whopping £50,000; but most lenders have a £30,000-£35,000 limit. Regardless of the lender and loan amount you choose, the amount borrowed will always be the subject of an Annual Percentage Rate or APR. The APR determines the amount of interest that you will have to pay on top of the loan amount. The APR can differ from lender to lender; even the way you apply can have a bearing on the APR offered; if you apply via the telephone you may be quoted a higher APR than if you apply online and vice versa.
It is always advisable to shop around for the best deal to see which lender is offering the most competitive rates of interest before making the application itself. Despite the recent Bank of England base rate increase, unsecured loans remain at some of the lowest competitive rates ever seen. Always start by comparing the Annual Percentage Rate (APR), which is the annual rate that you will be charged for borrowing. It is always worthwhile familiarising yourself with the different ways lenders quote the interest rates on offer. For your benefit, we have listed the different types of interest available below. From the list you should be able to decide which method of interest would suit you.
A fixed interest rate will not fluctuate throughout the term of the loan, even if there is a change in the banks base rate. Your monthly payments stay the same so planning and budgeting is easier.
A variable interest rate may fluctuate to reflect any changes in the banks base rate. If there is a change you could see your repayments increase or even fall depending on the variation in the base rate.
A typical interest rate is what the majority of applicants who are successful for credit receive. The rate offered to you is based on the loan amount, repayment term and an evaluation of your individual financial status.
Additional things to consider when taking your loan
Before you complete your loan, there are always other factors to take into consideration.
Of course, a low APR is a major part when it comes to your final decision; however, you should always take a good long look at the small print of any loan agreement before you sign on the dotted line. Some lenders may apply an early settlement charge or redemption penalty as it is also known. This can apply if the debt is repaid in full before the end of the original loan agreement date. The charges may vary from lender to lender but as an example, you may have to pay for example an extra months’ worth of interest if you decide to settle the debt early. If you feel that you may be in a position to pay the loan in full before the end of the agreement, then you may want to consider a loan with no early settlement charges/redemption penalties, even if the APR is slightly higher. The decision is yours but make sure you do the maths before finally taking the loan.
Unsecured personal loans are repayable on a month to month basis. If you are looking to pay the debt off at a faster pace, then some lenders allow a level of flexibility when it comes to the repayments. This may consist of an option to make over-payments on the loan or even extra lump sum payments. This gives you the opportunity to clear the debt in a shorter time span than was first agreed, and this will save you in interest charges. What you may also be in a position to do with a truly flexible loan is withdraw funds from the account on a rolling basis. However, to do this, you must ensure that you stay within your agreed credit limit.
Some lenders offer repayment holidays or payment breaks, this can allow you to pause your monthly loan repayments. If you take the repayment holiday/payment break at the start of your loan, then this is known as a ‘deferred payment’, you can however take a repayment holiday/payment break at any time during the loan period as long as it has been agreed with the lender beforehand. If you do decide on a repayment holiday/payment break, then the interest on the loans outstanding balance will not stop but will continue to accrue. This may result in your monthly payments increasing as the debt will still need paying over the term that was agreed at the beginning of the loan.
Sometimes getting accepted for an unsecured personal loan can prove to be quite problematic. You may have what’s known as bad credit, changed your address often, have no previous credit history or maybe you are self-employed. These are just some examples as to why an individual may encounter trouble when it comes to being accepted for their unsecured personal loan.
However, there are lenders in the market place today who offer what’s known as a ‘bad credit’ loans. This type of loan is mainly for people who have a complicated state of affairs when it comes to borrowing.
What an individual with bad credit has to consider when being offered this type of unsecured personal loan is of course the APR. The APR is certain to be higher than that of a High Street bank or any other typical unsecured personal loans provider due to the risk element the lender is undertaking when providing the finance.
Any unsecured personal loan you take will be governed by the Consumer Credit Act of 1974, and the legal powers of this act were extended by the Financial Services and Markets Act 2000, the Enterprise Act 2002 an then an amended 2006 Consumer Credit Act. There are strict regulations in place on how money is lent; the regulations are not only there to protect you as a consumer but also there to protect lenders. The Consumer Credit Act of 1974 covers unsecured personal loans up to £25,000 and sets out consumer rights and lenders codes of conduct. The amendments introduced in 2006, introduced an ombudsman scheme and extended the powers of the Office of Fair Trading, which is now the Financial Conduct Authority.
How do I apply?
Here at Unsecured Loans for You, we want to make it as simple as possible for you to apply for your unsecured personal loan. When applying through our site, you will either complete our own short application form or you will be redirected to the lenders website to complete the application with them direct. If you have bad credit then we advise that you complete our simple, free and easy application form online. Whatever your circumstances, we at Unsecured Loans for You can look to provide you with the correct unsecured personal loan option based on the information you provide.
What happens next?
If you apply through Unsecured Loans for You, your application will be processed quickly and efficiently once all information has been collated and passed through our automated underwriting system. An in-principle decision is communicated to you usually within 15 minutes via email. As the underwriting process is automated there is no need for phone calls which adds speed to the application process.
Your information is then rapidly sent to the relevant lenders via email and you will receive a final decision usually within 48 hours. As a licensed credit broker, we will not carry out any credit searches. However, each lender who receives your application may need to carry out a soft search or a full credit search. This is so the lender can get a better understanding of your financial status. In particular, the lenders will be interested in any County Court Judgments (or CCJ’s as they are commonly known), defaults or arrears, information on your current credit commitments, searches made by other finance companies and information relating to the electoral roll. If you are refused the unsecured personal loan or wish to enquire about details relating to your own credit file, then you can apply to the credit reference agencies for a copy of your record.
Accessing your credit file is now an extremely simple process. The three main credit reference agencies in the UK are Experian, Equifax and Callcredit and they all hold information on you which lenders use to assess any loan application.
You can now view your credit file online with Experian. So you can gain an insight into how a lender may see your financial status. Log on at https://www.experian.co.uk for further info. They do offer a free 30 day trial as well.
Likewise online with Equifax there are two ways to see your file. One provides free monthly reports and the other is a 30-day free trial of its full credit report and credit monitoring service. Link to them on https://www.equifax.co.uk
Callcredit is the UK’s newest credit reference agency, though it tends to not be as widely used as the two massive agencies above. However, you can get access at any time to your Callcredit report and score, via https://www.noddle.co.uk which is a free for life service.
If you ever fall into difficulties and find yourself in financial hardship then you should speak to your lender straight away, especially if you feel that won’t be able to make your payments. The sooner you contact the lender the better as they will be a lot more understanding to your circumstances. If you have been refused credit or need advice with debt, you may want to view our consolidation page where there is a lot more information available on this subject or visit www.moneyadviceservice.org.uk.
Please note, for this service Unsecured Loans for You will not charge you a fee, it’s entirely FREE! We make our money from the lender, NOT the applicant. And because we are not tied to any one lender, we are free to source the very best unsecured loan deal for you.
We are proud of our reputation for helping people who are struggling to obtain loans via other resources. There’s no need to be put off if you think you have a low credit score or a bad credit history as we are dedicated to helping those who have been declined elsewhere. There’s a whole lot more information on our site and we suggest that you peruse the content before settling on any one particular product. It is advisable that you take the time to read our Terms and conditions before you actually use any of the services provided by this site.