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All unsecured loans

Personal loans, or unsecured loans, are often the cheapest way to borrow money for expensive purchases and home improvements. Find a selection of low interest loans here to help find the best deal for you.


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How do loans work?

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A loan is a cash lump sum from a lender that you pay back with interest. Most loans are for a fixed sum and paid back over a set time but there are more flexible variations.

Some loans are designed for funding specific circumstances, such as:

  • Buying a property

  • Buying a car

  • Doing home renovations

  • Starting a business

When you take out a loan, you are responsible for repaying the amount you have borrowed, as well as any interest and other fees charged by the lender. You usually can't borrow more money on your loan during the repayment period.

What types of loans can you get?

Secured loans

Secured loans are where the debt is tied to an asset. If you’re unable to repay the loan, the lender can repossess the asset to offset the payment. Mortgages and car loans are examples of secured loans.

They are typically used for long term borrowing, some for up to 40 years. While this may make your monthly instalments more affordable, it drives up the lifetime cost of the loan because of the interest.

Unsecured loans

Unsecured loans, also known as personal loans, don't require you to provide extra security to the lender. Your credit rating and financial situation are two of the biggest influencing factors for lenders to consider.

This also means that you're likely to be able to borrow a lot less with a personal loan, than you would be able to with a secured loan.

Also remember that rates can vary between different loan types, so it’s important to know what you're looking for when you compare loans.

Other types of loans you could consider

Car loans

Car loans are unsecured personal loans that you can use to buy a car outright. This means if the car is sold, written off or stolen inside the terms of the loan you will still have to keep making loan payments until the debt is cleared. Conversely, failing to keep up payments will not directly result in the repossession of your car.

Car loans are a different to car finance, which is secured against the vehicle you bought.

Car finance is a secured loan for the purchase of a vehicle.

One of the most common types of car loan is known as personal contract purchase, or PCP.

Most car dealerships offer some type of car finance option available. To get a clear idea of the cheapest loan rates, it’s worth doing a loan comparison before you go to the car dealership.

Debt consolidation

Debt consolidation loans are unsecured loans that you use to pay off any more expensive debt you already have. For example, you could take out a loan to pay off your overdraft and credit card debts.

They can help you reduce your monthly repayments, cut down interest charges, and make it easier to manage your finances.

But debt consolidation loans tend to have less flexible terms than things like credit cards and overdrafts. This means it could take you longer to repay and therefore cost more overall.

Bad credit loans

Personal loans for bad credit are unsecured loans for those with a problematic credit history.

Even the low interest loans for bad credit are relatively expensive compared to a standard loan because the lender has no security and may be concerned you will not repay what you owe.

You could have a bad credit score for any number of reasons, including:

  • Having no credit history because you’ve never had credit before, or are from overseas

  • Missing or defaulting on payments

  • Not being on the electoral register

Guarantor loans

Guarantor loans let people with a bad credit score borrow money by naming a family member or close friend as a guarantor. The person you choose is liable to repay the loan on your behalf if you can't.

Guarantor loans are technically unsecured, but the guarantor and their assets (they must have at least 50% equity in their property if they own one) do act as security.

What to look out for when you compare loans

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It's important to compare loans to make sure that you are getting the best deal on the market for you.

Things to look out for when doing a loan comparison include:

  • APR

  • The repayment period

  • Fixed or variable rate

  • Application time

What happens when you’re approved for a loan?

  • When you’re approved for a loan, the money should be paid directly into your nominated account

  • You then repay the loan in monthly instalments for the course of the agreed term

  • There's usually a 14-day cooling-off period, during which you can cancel the loan if you change your mind about it

  • You must repay the full amount to avoid penalties

Other forms of borrowing

Other forms of borrowing include; credit cards, overdrafts and store cards.

Asides from overdrafts, these generally don't give you cash when you take them out, but instead give you credit, which you must pay back some of each month.

Depending on the type of credit card you have, you can continue to spend on them while you're paying them off. But they have a set limit that you can't exceed, and you should only ever spend what you can comfortably afford to pay back.

Many of us will at some point take out a loan. Either to buy a car, or to fund something we can’t afford outright. But when considering a loan, it’s crucial for borrowers to assess all possible options and understand terms and have a repayment plan in place.


APR (Annual Percentage Rate)

1. APR (Annual Percentage Rate)

To find the best loan deals, the APR (annual percentage rate) is one of the most important things to look at.

The APR includes the interest and any extra charges like set up fees. The higher the APR, the higher your repayments for the same loan size.

Bad credit loans and guarantor loans have higher APRs than normal personal loans. This makes them an expensive way to borrow money.

Payday loans have the highest APR, often over 1,000%, but over a short period and for relatively small amounts of money. That means they are very rarely suitable for larger projects and more expensive than many other types of borrowing.

Repayment period

2. Repayment period

Repayment periods for unsecured personal loans are usually between 1 and 7 years. They can be longer for secured loans. For example, the average initial mortgage term is 25 years.

Loans over longer periods have lower monthly repayments. But the longer your take to repay your loan the more it will cost you because of the interest.

Fixed or variable rate

3. Fixed or variable rate

Check to see if the interest rate on your loan is fixed or variable. If you prefer to know exactly how much you need to pay each month, a fixed rate loan may be better for you.

Variable rates may be cheaper at first, but there’s a risk they could go up in price at any time and at the lender’s discretion.

Application time

4. Application time

the time it takes a lender to process your loan application varies. It’s usually anything from 24 hours to 1 week. It may be longer if there are problems with your application.

Eligibility checkers show you which loans you're most likely to be accepted for before you apply. They only do a ‘soft search’ on your credit file, which doesn't show up on your credit file to lenders and so doesn't impact your creditworthiness. A hard search - typically made when you apply for a loan - is visible to other lenders. This could impact the rates you are offered or see you rejected outright if there are a lot of them made in a short space of time, as it can make you seem desperate for money.

What happens if you’re turned down for a loan?

What happens if you’re turned down for a loan?

You may be turned down for a loan if you do not meet the lender's criteria or have a poor credit history. In these cases you may still be accepted for a bad credit personal loan, but there's no guarantee.

Its good practice to always check your credit report before you apply for a loan. It gives you the opportunity to check for errors and avoid applying for loans you’ll likely be rejected for.

A rejected application could further damage your credit file and your score.

You can apply for a more suitable loan if you’ve previously been rejected for a different one. But lots of applications in a short space of time will look bad on your credit report.

A guarantor loan may be an option if you cannot get a loan on your own.

Another alternative to a loan is a credit card. Like with loans, there are special credit cards for those with bad credit.

Do what you can to pay off existing debts and minimise your outgoings. Of course, this may not always be possible.

If you are in real financial difficulty, a loan will only add to your debts. Debt charities like Step Change or Citizens Advice can help you sort your finances

Last updated: March 21, 2024