Unsecured Loans

When looking for a personal loan, borrowers generally have two options to choose from - unsecured personal loans or secured personal loans. Unsecured loans are loans where the borrower does not have to officially use any collateral against the loan. These are open to both homeowners and tenants, although some providers of unsecured loans would prefer dealing with homeowners only. The amount you can borrow on unsecured loans is typically limited to a maximum of $25,000. It is also not likely that you will be able to obtain an unsecured personal loan for an amount less than $1,000. 

Secured loans however can provide borrowers with the ability to borrow more than $25,000 on a personal loan.  They are nearly exclusively available to homeowners since a type of collateral is required to place against the loan.  Most of the time this collateral is the borrower's home or equity in the borrower's home. 

Both secured loans and unsecured loans could be arranged throughout a great diversity of lending sources which include high street banks, Internet lenders and building societies.  With so many sources to choose from it can occasionally become difficult to decide who to get your loans from.  Here are some points to consider in an attempt to help you make the right decision: 

APR - The APR is the annual percentage rate - i.e.  the rate of interest that you will pay on unsecured loans once any introductory rates expire.  The APR will basically dictate how much your unsecured loan will cost.  The lower the APR then the less you will wind up paying for your unsecured loan.  You should also look out for APR charged on a sliding scale.  Certain loans companies will only give their headline APR rate when the borrower commits to an unsecured loan of 'x' quantity.  Smaller loans are regularly charged at a much higher APR and these can be more than three times the headline rate. 

Fixed or variable rates - The majority of unsecured loans are available on a variable APR.  This means that the interest rate could go up or down in order to reflect changes in the base rate as set by the bank.  However, several loan companies offer unsecured personal loans at fixed interest rates.  The fixed rates are originally higher than the variable rates, but will protect you from future increases in the standard APR rate across the life of the unsecured loan. 

Credit arrangement fees - Certain lenders of unsecured personal loans will charge a credit arrangement fee in addition to an administration fee for setting up a loan while other lenders may waive one or both of these fees, saving you money. 

Online application form - Does the lender have a user-friendly online application form?  Using an online application form is regularly the fastest route down which to apply for an unsecured loan. 

Processing time - How long will it take for the lender to provide you with a decision on your application?  Some lenders offer instant decisions on unsecured personal loans while others will need additional investigation which can take several days to weeks for a decision. 

Loan payment protection - Most lenders provide a payment protection on your unsecured personal loan in the event that you are made redundant or are not able to receive an income due to illness.  The cost of loan payment protection could vary significantly between lenders so if you are thinking about taking out a loan payment protection make sure it isn't going to cost you an arm and a leg!