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How to Compare Unsecured Loans
An unsecured loan is the perfect loan for anyone and any anything. With these loans you don't even need to be a homeowner to borrow anything from a £1,000 to £25,000.
The amount you are entitled to will be based on your credit score and repayment ability, so you should be leant a sensible amount that you can repay without too much struggle.
Unsecured loans are good for...
A good credit history
If you have a credit score to rival Bill Gates then these loans are ideal!
The state of your current finances dictates the amount of money you will be able to borrow and at what rate. This may seem unfair, but as these loans are unsecured this is the only platform a lender can use to judge the worthiness of an application, and unlike a secured loan they don't have your property for collateral if you don't pay them back.
Lenders employ professional credit check agencies to check through your past records adding and deducting points depending on your financial history.
You can check you current credit score online at www.CreditExpert.co.uk . The company, run by Experian, offer a 30 day trial monitoring service for free.
Unsecured loans are unsuitable for...
Big borrowing
As the bank has little more than your word as promise of repayment they will be reluctant to lend you as much as you could receive with a secured loan.
If you are looking to borrow upwards of £25,000 you will need to look in our secured loan section and will also need to own a property.
Poor credit history
The lender can only judge the likelihood of receiving their money back by your past borrowing. Therefore, if you have had a sporadic financial history you may find it difficult to obtain an unsecured loan.
If this is the case don't despair, there are plenty of companies who will lend to people with a bad financial history, although you will more than likely have to pay a higher rate of interest. See our section on bad credit loans.
Look for:
The best rates
If you have a strong financial past you can afford to be picky when it comes to unsecured loan selection. Look for the lowest APR and the best payment plans.
Be aware of Flexi-loans, which offer payment plans that can be adjusted and amended over time to suit your changing needs.
Check out our unsecured loan comparison page for help on deciding which secured loan best suits your circumstances.
Watch out for:
Interest rate jargon
When looking at the APR for an unsecured loan it is important to understand the grounds on which that interest rate is offered.
Typical APR:
The rate of interest that most clients will be offered. You could be offered a better or worse rate depending on your circumstances. If the loan you are after states a 'typical' APR make sure you get a personal quote to be sure what rate you will actually receive.
Set APR:
The rate stated is that which is offered to all clients regardless of circumstance.
Variable APR:
This means that the actual rate of interest you pay will fluctuate according to changes in the Bank of England base rate.
Fixed APR:
The interest rate quoted at the beginning of your loan term will stay that way for the life of the repayment plan. This is the easiest way to budget your repayments effectively.
Don't forget!
Timing is of the essence!
The majority of people take out loans for a specific large purchase or string of purchases so getting your loan at the right time is crucial.
Get your loan in too soon and you will have lots of money accumulating interest that you are itching to spend; too late and you will be rushing through the application process so that you don't miss the payment deadline for the luxury holiday you've been waiting for.
Make sure you are aware of the application process, so that you can get your money when you want it!
- Apply for the loan (easily accomplished online)
- The lender will contact you soon afterwards as to whether or not you have been accepted.
- If you are accepted you will be required to send off documentation (ID and proof of earnings)
- When the documents have been verified you will be sent a contract
- Sign and send back the contract
- The loan will be transferred to your bank account in 3 working days
This process is likely to take 2-6 weeks. However, if you are desperate you can pay for a fast track service which means that documentation is couriered to you and funds transferred in 24 hours, although you are likely to be charged around £50 for the privilege.
Compare unsecured loans
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