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How much can I borrow?
Unsecured loans lend money based upon your personal and financial circumstances.
The lending criteria heavily relies upon your credit history and how much you can afford to borrow, by taking into account your credit score and your income.
Unsecured or secured loan?
There are many reasons why a person may decide to take out an unsecured personal loan rather than a secured one. The most obvious reason may be that they do not own their own home, and therefore are not eligible for a secured loan, as these are usually secured against the home.
It may be that you do own your own home but do want the risk of a loan secured upon it hanging on your head – after all, failure to keep up with repayments can result in the loss of your home. Just having a mortgage can help when borrowing larger sums of money on an unsecured basis as mortgages will often increase your credit rating.
Or it may be that you simply want a small loan over a shorter period, and prefer to take finance that is not secured against any asset.
Whatever your reasons, there are a number of lenders out there that offer some very competitive deals on unsecured personal loans.
How much can I borrow with an unsecured loan?
There are a number of key differences between secured and unsecured loans, and one of the main ones relates to how money is leant and this can determine the amount you can borrow.
Secured loans are generally secured against the home, and the amount that you can borrow will depend upon the value of your property and the amount of equity you have. Therefore, those with a lot of equity in the home (the market value of the property minus any loans or mortgage secured upon it) have the potential to borrow a fair amount of money.
With an unsecured loan the lending criteria is different. Because the loan is not secured there is no collateral for the lender in the event that you are unable to keep up with repayments.
The lender can therefore not afford to take the kind of risks that can be taken with secured loans in terms of the amount that can be borrowed. In many cases, unsecured personal loans in the UK range from around £1,000 to £25,000 – although this can vary from one lender to another.
The amount that you can borrow will also depend on your circumstances. Amongst the factors that will be taken into account when determining the amount that you can borrow is your income, your outgoings and other financial commitments, and your credit rating.
If you have a poor credit rating then you may not be able to borrow any money at all on an unsecured basis. When looking into unsecured loans it is important that you borrow only the amount that you can afford to repay.
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