Unsecured loans - also known as personal loans - allow you to borrow money from a lender without offering up an asset that you own as security.
Instead, unsecured loans are borrowed against your personal earnings and repayment is dependent on a fixed interest rate. Essentially, unsecured loans differ from secured loans in that your home - the most commonly used item of collateral - is much less likely to be at risk if you default on your debts.
Advantages and disadvantages of unsecured loans
For many, unsecured loans are a more attractive option than secured loans due to their many advantages, which include:
They can often be obtained at a faster rate
Unsecured loans are ideal if you want to borrow a small sum of money and repay it quickly
Your assets will not be at immediate risk if you default on your debt.
At the same time, unsecured loans also have significant disadvantages, such as:
Interest rates can be higher than with secured loans
You usually need a good credit history for an unsecured loan to be approved
Unsecured loans restrict you to fairly small amounts of finance
How to get an unsecured loan
Read more on secured loans and remortgaging to discover which type of finance is right for you.