Unsecured Personal Loan

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An unsecured personal loan is basically a plain loan - it's not secured against your home

An unsecured personal loan is pretty much the normal way to borrow a large sum of money for a range of expensive things. Unsecured personal loans usually carry an interest rate of between 7% and 12% APR. Within the consumer credit act, unsecured loans can reach a maximum of £25,000 but generally most lenders will only offer you between £500 and £15,000. Typical purchases include home improvements, holidays, cars and wedings.

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Don't be afraid of the term "unsecured" - it simply means that the loan has no collateral. In other words, the lender has lent you the money without contractually getting their hands on a piece of your property in case you don't pay. This is a direct opposit to a loan secured on your home, which means that the bank can take away your home if you don't pay. With an unsecured loan, they can still send the bailiffs round eventually, but they're obliged to find a better solution first.

In the old days the place you got a loan was a bank - and it was called a bank loan. The term "personal" loan is used because nowadays, everyone from insurance companies to supermarkets is selling financial products, hence the term "unsecured personal loan"

Before signing up to a loan, notice that you are entering into an agreement. You'll get money, but you'll pay it back in a structured way each month. There are some exceptions e.g. Egg have a flexible loan which allows payment holidays and Clydesdale will even let you make weekly payments. So before taking out an unsecured personal loan, decide whether your credit cards can offer a better deal, and certainly conduct a financial review to see if you're spending efficiently in the first place.

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