- 11
- May
An unsecured personal loan is a loan that is offered by banks and other lenders that require no security for the debt. This type of loan is available for a range of different amounts and repayment terms; it all depends on the amount and the purpose of the loan. Larger loans will usually be taken over longer terms such as 7 to 10 years. Smaller loan terms will vary, depending on the amount you borrow. With a personal loan the maximum amount that you can borrow is £25,000.
The amount that you borrow, whether it is £5,000 or £25,000, is subject to an interest charge, which is known as the Annual Percentage Rate (APR). Typically you determine the best product by comparing the APR, however with a personal loan, you will need to take other factors into consideration. You will want to look at the overall monthly repayments and the overall cost of the loan to determine what the best offer is.
Whilst searching for a personal loan, there are other things that you will want to take into consideration, such as a redemption penalty. Some lenders will apply an early settlement charge if the loan is repaid before the agreed end date, and if you feel that you will repay the full amount before the agreed date, you will want to look for a loan with no redemption penalty. Other factors to consider are the insurance that the lender may require you to take out on the loan. Because it is an unsecured loan, and the lender has no collateral for the loan, they often require you to have payment protection insurance. Payment protection insurance will protect both you and the lender should you fail to meet your repayments due to sickness, accident or unemployment. However, there is no need to take out the policy offered by your lender. Usually this is overly expensive. Independent insurers offer the same terms at far cheaper rates.
