An unsecured loan is a way of borrowing money from a lender such as a bank or building society without having to put up any collateral.It is also known as a personal loan. The interest rates for an unsecured loan are generally higher than that of a secured loan as there is a higher risk for the lender should repayments not be met.

Typically, the minimum amount that can be borrowed is £1000 - £25 000 although some lenders will offer loans from £500. Repayments periods can vary depending on the amount and purpose of the loan. Being approved for an unsecured loan can be difficult if you have a bad credit history, have moved addresses frequently or have no credit history or are self employed. It is possible to get this type of loan through lenders who can help people with 'bad credit loans' although the Annual Percentage Rate (APR) is higher.

There are many ways of obtaining an unsecured loan either through a high street lender ie. a bank of building society or a specialised loan company either via the telephone or online. Online providers tend to have lower APRs so by shopping around it is possible to get a cheap loan.

When applying for an unsecured loan it is important to check the policy carefully. Some loans have an early settlement charge so if you pay the loan off before the due date, there is a charge which can be anything up to two months interest. It is also important to check the interest rates as some lenders will offer a fixed interest rate which means that you will pay the same premium each month until the end of the term. A variable rate means that the amount paid each month can go up or down in accordance with the bank base rate.