What is an unsecured loan?
The definition of an unsecured loan is actually quite straightforward. You borrow money from a lender over a set time period in which you agree to pay back the loan. It’s not secured against an asset but failure to make payments on time can can incur additional charges or consequences such as affecting your credit score.
What are unsecured loans for?
Typically speaking, unsecured loans help you pay for smaller expenses compared to secured loans. For instance, these could be things such as car repairs. But they can be used for home improvements, a car purchase or debt consolidation. Being smaller value loans, unsecured loans tend to have a shorter repayment terms than secured loans. There can be flexibility and you can pay over various terms of up to around 7 years.
They can also have a simpler application process than secured loans as they are not secured against an asset It is important to note with unsecured loans, if you don’t make payments, it is possible that additional charges could be applied to the loan. This will show on your credit record. Likewise, in the event that an unsecured loan is not able to be paid back, the lender may still take action to get their money back..