An unsecured personal loan is a type of personal finance that can be used for anything from a holiday to education fees, debt consolidation, or to purchase an asset like a car or caravan.

It’s important when applying for an unsecured personal loan that you understand eligibility, interest rates, and lender considerations.

An unsecured personal loan works just like a regular personal loan in that you’ll be borrowing money from a bank or lender to fund personal purchases (outside of property and mortgages). The difference between a secured personal loan and an unsecured personal loan is that it will not be tied to collateral. Where secured loans require some kind of collateral as a condition of borrowing (property, cars, or other assets), an unsecured loan is fixed-term finance with set repayments throughout the life of the loan.

An unsecured loan is great if you don’t want to offer up collateral – unsecured personal loans can also be more flexible, and the application process may be faster than a secured loan. However, it does mean that the lender is taking on more risk without collateral and will typically charge higher interest rates to compensate.

Working with a broker can make it easier to get an unsecured personal loan that works in your favour. A broker won’t be in charge of lending you the money – but they will do a comprehensive comparison of the different alternatives available, helping you to find the best finance product for your circumstances.

How can it be used?

An unsecured personal loan can be used to fund any personal finance requirements. It is commonly used to consolidate debt, pay for a wedding, renovations, travel expenses, a car, or a major purchase like new technology or appliances. An unsecured personal loan cannot be used for a home loan deposit, for business purposes, or to pay for Lender’s Mortgage Insurance (LMI).

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