Unsecured Loans

How unsecured loans work...

It is unsurprising that an unsecured personal loan is often shortened to simply 'personal loan'. The 'unsecured' part can sound off-putting and worrying. Whereas, in reality an unsecured loan is one of the safest and secure forms of loan that you can get.

It is in fact, the lender who has less security, as they are lending to you on an assumption that you will pay back the loan based on nothing more than your sterling past credit history.

An unsecured, or personal loan allows you to borrow between £1000 and £25000 without having to put forward any 'collateral' to cover the debt.

Lenders use credit referencing agencies to look at your credit history and assess how much risk you pose to them. They will then agree to lend varying amounts of money, ranging from £1000 to £25000 based on the results of their findings.

3 steps to getting your loan.

1. The first thing to do - and more than likely the reason you looked up ChooseMoney - is to compare the rates of the different loan lenders out there, to make sure you get the best rate possible for you.

As all people are different, so there are loans to suit the variation in circumstances. The best loan for one person is not necessarily the best for another. To get the right deal you must consider:

• The APR
• Obviously, look for the lowest rate, but also bear in mind whether the rate is fixed or variable and whether it is typical or set. (see How to Choose for explanations of these different interest rates)


• Are you likely to repay the loan early?
• Some companies will charge early repayment penalties, but there are companies who don't charge for this.


• Would you benefit from a break before payments begin?
• If so, many lenders offer 'deferred repayments' when you first take out the loan, which can give you a gap of around 3 months, to allow you to get your finances in order, before payment begins.

2. Once you have decided on the right loan you need to apply. This is, thankfully a quick and easy process, which is easily done over the phone or online*.

* Before you pick up the phone check to see whether or not the company you have decided on offer an online discount!

3. After completing the application process its just a case of waiting to hear from the lender. Once you have been approved, you will be sent a contract to sign and send back along with certain proof of ID documents (passport, bank statements, utility bills etc).

When the lender receives this documentation - providing you are who you say you are - they will transfer your loan to your bank account and you can begin spending!

Compare unsecured loans