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Over what period can I spread unsecured loan repayments?
Unsecured loans can usually be repaid over a period of 1 to 5 or 7 years. However, there are lenders offering repayment periods on unsecured loans of up to 10 years.
These longer-term 10-year unsecured loans are available with Northern Rock or Tesco. Eskimo loans (provided by Northern Rock) also offer loan terms of up to 8 years.
The remaining bulk of unsecured loan lenders, including banks such as Halifax, Bank of Scotland and Alliance and Leicester (including the slightly cheaper rate Moneyback Bank loan) offer repayment terms of between 1 and 5 or 1 and 7 years.
Unsecured loans
Unsecured loans are available to homeowners, tenants, and those living with family based on eligibility requirements and credit rating.
Compared to a secured loan you will generally have a lower borrowing power than with an unsecured loan, and the repayment period is usually considerably shorter, although you do not need to own a property or use your property as security on the money borrowed.
With unsecured borrowing, you should bear in mind:
- If you want very long repayment periods or increased borrowing power you should consider a secured loan – these are only available to homeowners however.
- The standard maximum repayment options on unsecured loans is generally 5-7 years.
- Some lenders will offer up to ten years for repayment for unsecured loans.
Choosing a repayment period for your unsecured loan
When you take out an unsecured loan you will be offered a choice of repayment periods, and you can therefore choose a repayment term to suit your needs and your pocket up to the maximum term offered by the lender through which you take the loan.
Remember, the maximum repayment terms can vary from one lender to another, although most will offer maximum terms of between five and seven years. Some, however, may offer up to ten years as a repayment term for a fixed loan.
There are a couple of things that you should bear in mind when selecting your repayment term.
Firstly, the longer the repayment term you select the longer you will be repaying the debt, and the more interest you are likely to pay on your borrowing. However, do bear in mind that with unsecured loans you can often make over-payments or clear the whole balance in full at any time without incurring any penalties so the amount of time that you will be paying off the loan is not cast in stone.
Secondly, the longer the repayment period that you opt for the lower the monthly repayments will be, as you will be spreading your loan over a longer period and therefore will not have to pay as much each month.
If you are on a budget then it is a good idea to take the loan over the maximum term, particularly if there are no penalties for over-payments or early clearance of the loan, as this means that you have the flexibility to pay it off early if you have the means to do so.
Some of the loan companies that offer longer repayment terms include Northern Rock and Tesco, both of which offer up to ten years on their unsecured loan repayment terms, and Eskimo Loans, which offers up to eight years on unsecured loans.
Those looking for repayment terms of over ten years will need to consider a secured loan, where repayment terms are usually up to twenty-five years. However, you must be a homeowner in order to be considered for a secured loan.
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