Unsecured personal loans

An unsecured personal loan is used to provide an accessible and affordable method of borrowing money, whether your need is for a new car or the holiday of a lifetime. They offer a flexible means of borrowing any amount between £1,000 and £25,000 over a loan period that can range from one to five years. It means that you can change the amount you borrow, the period of the loan and therefore the monthly repayments to suit your income.

There are a wide range of providers of unsecured loans on the market, each with different criteria for lending and each offering a different interest rate. The rate you get charged on your loan will depend on the amount you borrow, and larger loans attract a lower rate of interest. It will also depend on your personal circumstances. People with poor credit history are unlikely to be eligible for the headline rate offered by an unsecured loan provider as unsecured loans are a riskier investment for loan providers since there is no security (such as a house) in place from which they can reclaim their funds if repayments are not met. If you do have poor credit history and have been refused unsecured borrowing before then you may find that a secured loan is more suitable.

Unsecured loans fall into two main categories. The most common are fixed personal loans as the loan amount and total interest payable is divided evenly over the loan term, making it a practical option as it enables you to plan realistically how much you can afford to pay back each month and borrow accordingly. The interest rate is also fixed for the term so no matter how standard interest rates fluctuate your monthly repayments will remain the same.

When making a comparison of fixed unsecured loans it is sensible to use the repayment calculator supplied by each loan provider to work out your likely monthly repayments for the amount you would like to borrow. Nevertheless these are only estimates based on the companies typical APR and your repayments may be slightly different depending on the interest rate offered to you. You should also compare fixed loan plans and look to see whether they offer any repayment holidays during the term of the loan and also whether they impose any charges for early repayment.

The other type of unsecured loan is a flexible loan. These are not as common and fewer unsecured loan providers offer them. They enable you to specify a maximum borrowing amount but you do not need to take all of the funds at once; instead you need only withdraw the amount that you wish to and then pay interest on this amount. This makes these types of loans very popular with anybody involved in a long term, variable project such as building work. Loans of this nature also allow some repayment flexibility, often stipulating a minimum amount to be paid each month but accepting greater repayments without charge.

Most unsecured loan providers also offer optional payment protection insurance along with their loans. This type of insurance is designed to meet the loan repayments for you if you are unable to pay due to sickness or unemployment. There is of course an additional cost but it can be worthwhile if only to provide you with peace of mind, especially when borrowing larger amounts.

A comparison of monthly repayments, additional features and charges offered by different unsecured loan providers should enable you to borrow the amount you require and repay it over a period of your choice in repayment amounts that fit in with your lifestyle.

Your Personal Loan is offering a loan of any amount from £5,000 to £25,000. The APR is fixed at 6.3%. Despite being unsecured, the loan is actually only available to home owners. Payment protection insurance is available from £13.26 a month. You need to be aged over 18 and under the age of 65; aged under 70 at the end of your loan term; a UK resident and working 16 hours or more per week in paid employment. Repayments on a £5,000 loan over three years would be £152.39, and the total amount repayable would be £5,486.16. The early redemption penalty is one month’s repayment.

Alliance & Leicester is offering a 6.4% APR, fixed, for amounts from £7,500 to £20,000.  These are available to new and existing customers and could save you over £1,000. Personal Loan Protection is optional. Typical monthly repayments on a £5,000 loan repaid over three years would hypothetically be £152.65 and the total amount repaid over the period would be £5,495.40. The early redemption penalty is two month’s repayments.

Lombard Direct has an unsecured loan on offer at 6.9%, fixed. Monthly repayments on a £5,000 loan over three years would be £155.91 making the total repaid over three years £5,612.76. The early redemption penalty is one month’s repayment.