If you need a loan for something relatively cheap, like a vacation somewhere exotic and warm, a new car, or even to replace the carpet in your home, you will probably compare unsecured loans to find the best one for you.
It's not written in stone, but in general, an unsecured loan should be used to pay for something that costs less than GBP25,000, and a fully secured loan should be used for something that costs more.
As the name suggests, an unsecured loan is one that doesn't have anything like your house as a guarantee that you'll pay it back. Instead, a bank or building society will look at your credit history and how much money you are making now. They might also look at your work history to see how stable your jobs have been. A person who is always getting a new job doesn't give a lender much reason to trust them.
If you have bad credit, it may be hard for you to get a loan that doesn't have to be paid back. But lenders are starting to see that these kinds of people aren't always the really bad risks they might seem to be at first. People with bad credit can now get unsecured loans from a lot of places. But if you have bad credit, the APR will be higher than if you have good credit. This is probably something you can't avoid, and you'll just have to take the time to find the best deal.
When you compare unsecured loans to secured loans, you will see right away that the interest rates for the unsecured loans are much higher. But in today's lending market, which is very competitive, you should find that most of the rates are about the same. Also, the best deal may not always be the one with the lowest interest rate. There are other things to think about, so things tend to go back and forth, and you have to sort through the confusion to find the best offer for you.
The length of time you have to pay back an unsecured loan is a very important factor. You might be limited in this way and have to pay back the loan sooner than you'd like, so this is where you need to look at unsecured loans the most carefully. Even though the monthly payments might be lower with a longer repayment period, the total amount that needs to be paid back will always be higher. You need to find a balance between how easy it is to pay less each month and how much money you can save by paying off the loan faster.
The way you fill out your application is another place where you can save money, but you need to compare it carefully. It is not uncommon for an APR to be higher for an application made by phone or in person at a bank or building society than for one made online. When an application is made online, it is done automatically and doesn't take up any time from the bank staff. So, this money saved can be given to you.
It's not easy to look at different unsecured loans and decide which one is best for you. But if you work hard and are patient, it's not hard to find the best solution. All of this is so much easier now because of the Internet, and comparing prices is almost fun because of it.
