Personal unsecured loan

A loan is money that you borrow from a financial services company, bank, or building society; an agreement is made between the lender and the borrower, for the debtor to repay the loan over a set period of time by making monthly instalments, which are usually for the same sum each month.

There are two types of personal loan, unsecured, and secured; a personal unsecured loan isn’t backed by collateral or assets nominated as security for the loan, and therefore because the lender cannot repossess your asset to repay the loan should you default on your payments they take on a greater risk with this type of lending.

For this reason personal unsecured loan providers have a tendency to offer interested rates that are higher than those available for secured lending, in addition it can be more difficult to obtain an unsecured loan as lending criteria is typically stricter.