A secured loan is a loan that is secured against an asset, such as a property. These loans are typically much larger, which is why they need to be secured against something with a high value. Unsecured loans are also called personal loans and often have higher interest rates. This is due to the fact that there is more risk in lending the money - there is no security for the lender like there is with a secured loan.
Unsecured credit includes bank loans, credit cards and short-term loans. There are benefits with each of these options, as well as restrictions. Bank loans are generally less flexible than other loans, as banks won’t typically lend less than £1000, to be repaid over a year or more. You could end up paying more in interest if you borrow for longer than necessary, or for more than you need. You’ll also need good credit to take out a bank or building society loan.
If you are looking into credit card options, you can find more information on the Money Saving Expert website. Like a bank loan, you’ll need to have a good credit history to take out a low-interest credit card. If you have bad credit, the credit cards you may be eligible for will likely charge high-interest rates.
Short term unsecured loans are available to those with poor credit, though the interest rates can be slightly higher. There is more flexibility, however, as you can choose the amount you need and the length of time you need to repay it. You won’t end up paying far more in interest because of restrictions in loan duration. Unlike with some bank loans, short-term lenders won’t charge you for making early payments, so you can save money in interest if you can pay early. Paying loans back early or on time can also improve your credit rating.
My Financial Broker can help you find an unsecured loan of up to £5000. We’ll find the best lender from our panel of trusted direct lenders, to get you the best possible rate.