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
• Depending on the lender, you can usually borrow from as little as £100. Each lender will have their own limits so it is best to check with each.
• They’re could be 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.
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A guide to unsecured personal loans