An unsecured loan is a loan that is not secured by collateral. Most credit cards are unsecured loans. Since there is no collateral offered, the rate is typically higher to compensate the lender for the greater risk being assumed. This type of loan is preferred for people who do not own their own home. Once you have been successful in obtaining your loan, you receive a lump sum, which you are expected to pay back within a defined period of time, for example, 36 months. The payments are usually a set amount each month. An unsecured loan usually has a higher interest rate, due to the fact that your home or any other asset is not secured on it, making it a higher risk. If you apply for an unsecured personal loan, your application will usually be processed much quicker than a secured personal loan, this is because you do not require to have your home valued as part of the loan application.

The amount you can borrow with an unsecured loan varies from about £500 upwards. It is repayable between 6 months and up to 10 years. Interest rates on an unsecured loan can be fixed or variable. A fixed rate offers the security of knowing what your payments will be each month, a variable rate means that if the interest rate increases or decreases, then so do your payments accordingly.

If you require a loan quickly, an unsecured loan is probably your best option as the application process is much quicker than an unsecured loan.