An unsecured loan is any loan where the lender relies on your promise to repay your loan rather than by securing the loan on an asset such as your home or car.
There are number of different loan types that feature in this comparison table all designed for varying circumstances and requirements.
Bank loans are loans provided by the kind of national and international brands that you’ll be used to seeing on your local high street. The banks that lend in the UK have broadly similar acceptance criteria and although we do feature some loans here that require you to be a homeowner, they are all unsecured loans.
Over the past five years several supermarkets have been granted banking licences and are offering unsecured instalment loans to customers with good credit profiles . Loan amounts range from £1000 to £25,000, rates range from single figures up into the mid teens and repayment periods range from one to seven years.
Peer to peer
Peer to peer lenders connect ordinary everyday borrowers with ordinary everyday savers, enabling you to borrow at competitive rates of interest whilst returning a competitive rate of interest to savers. Sounds complicated but it works just like any other unsecured loan.
If you have a bad credit history but are now on a firm financial footing, a guarantor loan is worth considering. In order to apply you will need to have a guarantor to support your application. This is usually a friend or family member but in all cases they must have a good credit history and trust you’ll meet the repayments. If you have any doubts that you can afford the repayments then do not apply as your guarantor will have to pick up the pieces on your behalf.
What not to do
Unsecured loans are generally reserved for those with a good credit history . If your credit score isn’t great then do not apply for these loans as your application will likely be declined. This will harm your credit file making it increasingly difficult to get accepted for the best rates in the future.
Unsecured loans are predominantly for those with a good, or very good credit rating . You’re also likely to need a regular income from a full time job. If you’re in receipt of Disability Living Allowance or payments from a pension then you do also have a chance of getting an unsecured loan. You’ll also need to hold a UK bank account in your name. If you’re thinking of getting an unsecured loan from a bank then chances are, you’ll need to have an account with that bank. It’s also worth mentioning that you’ll need to have lived in the UK for a decent length of time, how long depends on the individual lender but I’m talking upwards of three years. As with any credit, you need to be over 18 to apply.
Pricing and things to watch out for
We’ve established that unsecured lenders raise the bar quite high when it comes to criteria, so what do they offer in return? Expect interest rates ranging from around 3.2% right up to 340%. There’s quite a difference from top to bottom and that’s just because there’s quite a few different categories of lender who offer unsecured loans. Unsecured lenders are renowned for almost always charging customers a higher rate than advertised as they reserve their lowest rates for repeat customers. Loan amounts range from £1,000 to £25,000 and again this varies from lender to lender. Loan terms range from 1 to 7 years and you’ll usually be asked to make your repayments by direct debit or standing order. Loan purpose can be flexible, although a number of unsecured lenders will not lend to you for business purposes.
Providers of unsecured loans do not secure the loan against your assets and therefore rely purely on your promise to repay the loan. As a result unsecured loans are generally only available for those with good credit . If you have bad credit you will be better off referring to our loans for bad credit comparison table . Before applying for an unsecured loan it is vital that you can comfortably afford the repayments, if you have any doubt then do not apply.