Unsecured Loans

What is an unsecured loan?

An unsecured loan is an agreement between the lender and a borrower that is not secured against property. This is the opposite of a secured loan, which you might take out against your property or car.

Unsecured borrowing can mean higher rates because the lender feels there is a higher risk without property as a guarantee. However, they can be a useful and efficient option if you do not have property to secure your borrowing against and can be quicker to arrange.

How do unsecured loans work?

When you take out an unsecured loan, your chosen lender will let you borrow a set amount of money, which you pay back with interest over an agreed time period.

The loan isn’t secured against anything you own, so if you can’t keep up with repayments, they aren’t able to claim against your property or car. However, the lender could take you to court, where you may be liable to a county court judgement (CCJ) or debt collection. Before you borrow, you may want to plan out a monthly budget which includes your repayments to reduce the chances of this happening.

Advantages of choosing an unsecured loan

Some of the pros of unsecured borrowing include:

• Repayment is based on your credit history and rating, rather than any property you own.
• You’ll usually be offered a loan over a flexible period of time, usually at a fixed rate, allowing you to plan your payments carefully and ensure you can afford to borrow.
• If you meet your repayments on time and in full, unsecured loans can also help improve your credit score – improving your chances of getting better credit in the future.
• If you already have a good credit history, you may be offered a loan with a lower APR.

Disadvantages of choosing an unsecured loan

As with any loan product, unsecured loans do come with their own risks and financial commitments. These may include:

• If you have a low credit rating, the rates you’re offered could be higher for unsecured personal loans.
• Missing payments may result in additional fees and charges, which could negatively affect your credit score.
• Some lenders may charge a fee if you manage to pay back the debt in full sooner than the terms you’d originally agreed on. However, most lenders will only charge up to two months interest on early settlement.

Am I eligible for an unsecured loan?

Whether you’re looking to consolidate debt, improve your home or build a better credit rating, we help people from all walks of life get access to unsecured loans that meet their needs. Read our guide to loan eligibility to find out more about how lenders decide whether you’re a good fit for a particular loan product.

Before you apply for an unsecured loan

When thinking about applying for an unsecured loan, it’s important to consider your personal situation.

Can I afford it?

You should make an honest assessment of whether or not you can afford to pay back the loan each month, including the interest fees. This can help you avoid negatively affecting your credit score, and being open to debt collection and court action.

Check your credit report

Lenders will use your credit report to determine your suitability for a loan. For this reason, it’s important to make sure your report is accurate. Any errors in the information given about you like your address or income could affect the chances of your application’s success.

Read our guide to lending decisions to find out what else you can do to increase your chances.

Representative example

HOMEOWNER UNSECURED LOANS - Rates from 7.3% APR.

Representative example: if you borrow £12,000 over 4 years at a Representative APR of 15.4% APR (fixed) you would pay £330.33 per month.

The maximum APR is 99.1%.

What do I need to apply for an unsecured loan?

To apply online, you’ll need the following details to hand:

• Personal financial details
• Employment status
• Details of your income

Once you’ve supplied these, we’ll be in touch to talk through the next steps.

Ahead of our introductory call, it can be helpful to have your financial records handy, such as bank statements, monthly income and mortgage or rent payments.

If you’re planning to use your loan for debt consolidation, you can help speed up the process by gathering together the information you have about other existing loans or credit cards, including repayment costs and loan periods.

Commonly asked questions about unsecured loans

Here are a few of the questions our customers often ask about unsecured loans, so you can decide whether it’s for you.

Are unsecured loans bad for my credit rating?

No. In fact, a well-managed loan repayment can help you to improve your credit rating if managed properly.

By making regular payments and repaying the loan in full within the agreed time frame – or before - you’re demonstrating to future lenders that you’re a responsible borower.

Stay on top of payments and the loan won’t negatively affect your credit rating

Why is an unsecured interest rate higher?

Interest rates are generally higher on unsecured loans than secured loans because the lender doesn’t have any security, such as property, to protect the money they’ve lent to you.

They also may charge more interest if you have a low credit score or are paying off an unsecured loan from a different provider, due to the change in situation and associated risk perceived by the lender.

What happens to an unsecured loan after death?

If a person dies and leaves unsecured loans unpaid, with no property that can be exchanged, the debts will be written off. However, if the deceased has property, the amount owed will be taken from their estate. You can read more about this here.

What is a soft search?

A soft search lets a lender see your credit report without leaving any trace of their search on your public record – so you will be able to see it, but other lenders won’t.

Hard credit searches, on the other hand, are visible and may negatively affect your credit score if they lead to unsuccessful loan applications.

How many unsecured loans can I have?

There’s no official limit to how many unsecured loans you can have at one time. However, you should always make sure you can afford all the repayments and interest or any fees before taking out an additional loan.

If you have multiple loans, it’s also worth noting that lenders will be able to see this on your credit report, and may opt not to lend you more money if the perceived risk is high.

What happens if I default on an unsecured loan?

If you default on an unsecured loan, the lender can add fees or penalties to the total amount owed and take legal action to recover their debt. Ultimately, the loan may be taken over by a collection agency, who will pursue you for the outstanding payments.

Can an unsecured loan become secured?

Yes, it’s been known to happen but isn’t customary. It may occur if you continue to miss your repayments to the point where your lender (or creditor) takes you to court. If this happens and you’re ordered to pay back the money you owe, a charging order might be used. This allows the lender to secure the debt against an asset you own, for example your property. You can learn more about this here.

Unsecured loan details

At Norton Finance, we have access to over 600 loan products as well as flexible repayment plans.

• How much can I borrow?
  We help our customers borrow from £3,000 to £25,000 as an unsecured loan.

• How long are the repayment terms?
  Repayment terms range from one to seven years, allowing you to select the period that suits your circumstances.

• What are the interest rates?
  The interest rate you’re offered will depend on your credit history, your current income and other financial details.

• Are there any loan fees?
  At Norton Finance, we receive commission from the lender when a loan is completed. However, we don’t charge any broker fees on unsecured loans .