BORROWING ZONE - Unsecured loans

A personal loan is the generic term for a loan. The term is intended to refer to any loan other than those borrowed with the intention of buying property or investing in business.

You can usually borrow up to £15,000 for a period that can range from six months to 10 years. Generally speaking, the more you borrow, the lower the interest, but rates vary from around 8% to 20%.

There are two main categories of personal loans - secured and unsecured.

Secured Personal Loans. These loans are normally granted for specific purposes, and are always secured by some asset belonging to the borrower (or his guarantor), i.e. he offers collateral. This means that the borrower agrees to allow the bank to take possession/ownership of that asset if the loan is not repaid. The security may be the item purchased with the loan, e.g. a car, or an existing asset like your house. If you wish to read about this type of loan, click here.

Unsecured Personal Loans. These loans are normally granted for specific purposes also, but the borrower does not offer security. There is also a common loan arrangement which is a subset of this category of loan known as a Payday Loan. Payday Loans are small loans, loaned for a short term, and are normally processed very quickly.

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