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A Guide to Unsecured Personal Loans
Unsecured personal loans are offered by lending institutions such as banks and building societies and are so called because the lender requires no security for the debt. They are not available for speculative purposes or business purposes. Depending on the individual lender some other purposes may also be excluded, for example the purchase of timeshare property. Below is a quick and easy guide to UK personal loans.

Choosing the right loan
Personal loans are available for a range of different amounts and repayment terms. Depending on the amount and purpose of the loan, you will be able to choose from a range of repayment periods. Larger loans such as those over £10,000 can usually be taken over longer terms i.e. 7 to 10 years. The minimum loan amount is typically £1,000 although some lenders do offer £500 and upwards.

The amount borrowed is subject to an interest charge, and the interest rate applied is known as the Annual Percentage Rate (APR). Generally, it is advisable to compare the APRs of different products as a means of determining how competitive they really are. It is not unusual for lenders to offer different APRs depending on the method of application e.g. applications by telephone may receive a higher APR than those done online, so it’s well worth shopping around for the best deal.

If you are looking for a low cost loan, comparing the APR is a good place to start. Lenders do quote interest rates in different ways, and it's worth familiarising yourself with these before you start:

1. A fixed interest rate will stay the same throughout the term of the loan, regardless of any changes in the bank base rate. This means your monthly repayments should always stay the same, allowing you to budget accurately.
2. A variable interest rate may rise and fall in line with any changes to the bank base rate. This could result in your monthly repayments changing during the term.

Although lowest APR is one factor that contributes to a ‘cheap’ loan, you should always pay attention to the small print as any additional costs will be found there. Some lenders do apply an early settlement charge (also known as a redemption penalty) if the debt is repaid in full before the agreed end date.

This can be up to 2 months interest so it pays to check this out before you commit. If you think you'll clear the debt before the end of the term then your best bet will probably be a loan with no early settlement costs, even if the APR is slightly higher. Whatever you decide, you’ll need to do your sums before you sign on the dotted line.