What is an unsecured loan?

An unsecured personal loan can be a helpful option to spread the cost of a big expense. You can take out a small or large unsecured loan from a bank or lender, and payback in regular payments until the full amount, including any interest, is repaid.

With personal unsecured loans, valuable items such as your home or car aren’t at risk of being repossessed by the lender. The lender will have no claim on your financial assets if you miss a repayment as unsecured loans aren’t tied to any assets.

However, unsecured loans generally have higher interest rates than secured loans. If you miss or are later with payments then this may have an impact on your credit history and could attract later fees, so always make sure that taking out a loan is the right choice for you.

These loans can also be used to combine debts into one monthly payment and may reduce higher interest debts.

Secured vs unsecured loan

There are two main types of loans you can apply for, secured or unsecured.

The difference between secured loans and unsecured personal loans is that with a secured loan, the lender takes collateral for the loan as security. The security is in place to cover the costs if you aren’t able to repay the loan as agreed. Collateral tends to be an asset that’s easy to value, such as a car or property.

Key benefits of an unsecured loan

• Often unsecured personal loans allow flexibility with loan amounts and repayment terms

• The lender does not typically require security in the form of assets such as your home or the need of a guarantor

• The interest rate (APR) will usually be fixed, so you’ll know how much your payments will be every month

• Unsecured loans can be more widely available than secured loans

How much does an unsecured loan cost?

If you’re accepted for a loan, you’ll usually agree to pay back interest on what you’ve borrowed. The amount of interest you’ll pay depends on the Annual Percentage Rate (APR).

With our loans, we offer a range from small unsecured loans starting from £1,000 to large unsecured loans of up to £40,000 for Nectar members, non Nectar members can borrow up to £25,000.

You can choose to repay your loan over a term that suits you. Depending on how much you borrow, our terms range from 1 to 7 years.

Use our loan calculator to work out how much you could comfortably borrow, your monthly repayments and representative APR rates.

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Find the right option for you

Before you apply for a secured or unsecured loan, it’s good to do your research. You can start by:

• Looking up your credit rating to find out if it might affect your application for an unsecured loan. For information on how to check your credit rating, read our guide to understanding your credit report here
• Comparing loan APRs and the payback terms
• Using our calculator to help work out the total amount repayable when you apply for a loan with us
• Calculating the monthly repayments on your loan application to make sure you can afford them
• Finding out if there are any extra costs you need to budget for, such as setup fees or late/early repayment penalties

Please be aware that multiple credit searches may make obtaining future credit more difficult.

There are many reasons why you may need extra cash, our checklist helps you figure out if applying for a loan is the right option for you.

If you find the repayments of a personal loan too expensive, you can explore other options. Taking out a credit card can help with lower level short term borrowing during their promotional offer period. Another option could be speaking to your bank about an overdraft to help cover the costs of everyday expenses.

Remember, there are resources out there to help if you need advice. Citizens Advice is a good place to start.

How to apply

You can apply for an unsecured loan online or over the phone. When applying, make sure you have the necessary information to hand before you start the loan application process.

Typically, you’ll need:

• Your home addresses from the past three years
• Your bank account details
• Financial information including monthly incomings and outgoings
• Your employer’s name and address if you’re working