 Debt Management With Bad Credt And Unsecured Debts
A personal unsecured loan means exactly what it says, a loan 'not secured' on your assets, for you to use as you wish. Many people use them to purchase a new car, a dream holiday, house renovations, or even to settle crippling credit card debts in a single go, thus giving you freedom to extend the payments over a longer period with a smaller interest rate.
With an unsecured loan, how much can I borrow?
You can generally get an unsecured personal loan for up to £15,000 (if you have a good credit record) however, some unsecured loan companies can offer you up to £25,000 unsecured (if you have an EXCELLENT credit record). Then again, remember that you should have the income to make all the loan repayments. With unsecured loans, you can often get approval in principle over the telephone.
What are the maximum and minimum repayment periods for an unsecured loan?
In part this is determined by the unsecured loan provider. A number of unsecured lenders can provide an unsecured loan for as little as twelve months, although a 5 to 7 year term is more frequent. The maximum unsecured loan length is usually 7 years but a number of unsecured loan companies will lend over 10 years. Unsecured loans are suitable for borrowers who want to repay a purchase over a few years. For people who only want the money for a short period, for example, six months, purchasing with a credit card may be better.
How does an unsecured loan interest rate operate?
Unsecured loan APRs are usually fixed for the length of the unsecured loan agreement, which means you know specifically the amount you will have to pay back per month. The drawback is that you might possibly repay more than borrowers who borrow a similar unsecured loan in 6 months' time - then again, you might pay less! Either way, you will not need to be anxious about loan repayments rising uncontrollably. Some unsecured loan companies will request that you take out a direct debit for the loan repayments. Generally, the rate of interest is less when you take out a larger unsecured loan. With unsecured loans, the critical element to be aware of is the Annual Percentage Rate (APR). Additionally, it's crucial to know the amount the unsecured loan will cost you in total.
Will I have to pass a credit history check?
Yes, unsecured loan companies need to ensure that borrowers are an 'acceptable risk' and therefore do not have a history of bad credit and unpaid debts. To ensure this, the unsecured lender will request your credit history from a credit reference agency - Experian, Equifax or CallCredit plc. An adverse credit history will not automatically hinder you from getting an unsecured loan, however, chances are you will be given an increased unsecured loan interest rate. You may find it more difficult to get an unsecured loan if you are a sole trader or if your employment status is temporary.
What is an unsecured loan payment protection insurance?
This is an insurance you can buy to pay for (under certain conditions) the unsecured loan monthly payments if you are incapable of doing so - for instance, when you have lost your job. Evaluate carefully if you genuinely need this. Unsecured loan payment protection insurance (a bundle with the loan) is often expensive and if your financial position is precarious, is it the best move for you to be borrowing more money anyway? If you do need a payment protection insurance, check out the exclusions and small print which could make it hard for you to benefit from the cover.
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