An Unsecured loan, often called a Personal Loan is a common way to borrow a “large” amount of money and is often cheaper than using your credit card or running up an overdraft.
Personal loans tend to be available from £1,000 to £15,000 – the higher the amount, the cheaper it tends to be, as the lender is going to get more in interest repayments.
The main thing to consider when thinking about taking a Personal Unsecured Loan is the APR – or “annual percentage rate”. This is a rate that includes fees and charges to give you an idea of what you will pay over a 12 month period. Lenders are obliged by law to give you the APR. Clearly, the higher the APR, the more interest you will pay over the term of your loan.
APR’s are probably the best way to compare one loan from another, however, you will often come across the term “Represetative APR” – This is an interest rate that at least 51% of people who applied for the loan in question were offered. This means that, based on your credit history, you could possibly be offered a higher rate. This is something you won’t find out until you actually apply for the loan.
Remember – When you apply for a loan, the proposed lender will perform a credit search which will be noted on your credit file. The more applications you make, the more searches noted on your file. If you have too many credit checks noted, it could mean that you may be turned down for credit in the future.