Unsecured Loans
Unsecured Loans
Unsecured personal loans are available from banks or building societies and unlike secured loans they do not require the borrower to provide security for the loan. However, if a borrower wishes to apply for an unsecured personal loan they may find themselves subject to a number of limiting factors.
Why opt for an Unsecured Personal Loan?
When opting to take out an unsecured personal loan the lender will need to know the reason behind the application. Generally unsecured loans cannot be used for speculative or business purposes. Some lenders may impose further restrictions, including investing in overseas property for example in the form of a timeshare.
The amount available to borrow will usually ranges from between £1,000 up to £25,000. A small number of lenders will offer loans from as little as £500. Typically loans that are taken out over £10,000 are payable over an agreed period usually between seven (84 months) to ten years (120 months).
A lender permitting an individual to take out an unsecured personal loan is governed by the Consumer Credit Act 1974 which covers loans up to the amount of £25,000. This legislation sets stringent guidelines as to when a lender can permit an unsecured personal loan and borrowers will be asked to sign a credit agreement, for these reasons personal loans are also referred to as ‘regulated loans’.
When considering taking out an unsecured personal loan shop around for the best Annual Percentage Rate (APR). Lenders will advertise the ‘typical APR’ which is not necessarily the rate everyone will be offered as long as 66% of people taking out an unsecured loan have been offered that rate then it can be advertised as the typical APR.
Individuals taking out an unsecured personal loan can opt for Payment Protection Insurance (PPI). This is an additional payment applied on top of your loan repayment. It covers the borrower in the eventually that they may suddenly find themselves unable to repay the debt. PPI tends to cover situations such as redundancy, loss of earnings or illness. However, such insurance policies may only cover a limited number of circumstances and rarely cover people who are self employed.
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