Unsecured Loans

What is an unsecured consolidation loan?

With a consolidation loan, your debt is restructured into one low, affordable amount that you agree to pay. An unsecured loan means you can borrow money from a lender without having to offer the lender security for the loan.

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Is an unsecured consolidation loan right for me?

  • Yes, if you need a reduction in monthly outgoings, to settle an Individual Voluntary Arrangement (IVA), to speed up repayment of several debts with one creditor or if you could change lenders for better interest rates, but you have no assets to use as security.
  • No, if you have used a consolidation loan unsuccessfully before, to consolidate an old consolidation loan or to free up credit and store cards that you intend to continue using as part of your normal monthly budget.

Compared to a secured loan, unsecured loan lenders have to accept a higher risk because they won’t have anything to fall back on if you can’t make the repayments. This means that they will have to carry out creditworthiness checks to evaluate the level of risk, including credit history, property ownership, income, size of loan and repayments and the number of recent loan applications.

After the checks have been made, the lender will either accept or decline your application. Not all lenders evaluate the risks the same for each case, and there is healthy competition within the unsecured loan market place. Some lenders will offer different products depending on the size of the risk they feel they are taking, and there are lenders that purposefully accept higher risk applicants. However, these lenders offset their risks by charging higher interest rates for these loans. The size of unsecured loans available ranges from £500 to £25,000, and the repayment schedules can vary from six months to ten years.

Unsecured loans can be taken out either as a fixed interest loan, allowing you to budget for a regular payment each month, or as a variable interest rate loan. Because these vary with the Bank of England base rate, it can be more difficult to budget for these. Choosing which format is the most suitable will be a matter of personal choice, depending on your needs and personal circumstances.

Call free on 0800 088 7505 to find out more or get help with applying for a Unsecured Loan. Alternatively you can read the Unsecured Loan FAQ's.