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A guide to unsecured personal loans

hands at desk with notebook and calculator
hands at desk with notebook and calculator

The name might sound complex, but it’s one of the easiest kinds of borrowing to understand.

An unsecured personal loan is exactly what it sounds like – money a person borrows which they haven’t secured against something they own, such as a car, to guarantee that the lender will get their money back should the customer not be able to afford to make the repayments. Sometimes, it’s just called an unsecured loan; other times just a personal loan. Most kinds of short-term borrowing are unsecured, including:

• Doorstep
• Payday
• Credit Union
• Online or instalment

It’s a different route to borrowing money when compared to a secured loan, which, as you might have guessed, is where your borrowing is secured against an asset, like a house or car.

Pros to Unsecured Loans

• You can borrow from £100 with Provident (or even less with other lenders) and as much as a £1,000.
• They’re less risky compared to a secured loan.
• Payday, doorstep, guarantor and other kinds of unsecured credit providers may be able to lend you money if you have a low credit score whilst mainstream lenders may not.

Cons to Unsecured Loans

• The interest costs are generally higher than for a secured loan.
• Large amounts, generally aren’t available for unsecured personal loans.

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