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Unsecured Loans

Unsecured loan rates are determined by your credit history and are not secured against your property or assets. They’re often used for debt consolidation, car purchase or home improvements.

An unsecured loan gives you the opportunity to borrow money even if you do not own your own property. A lender will offer repayment terms based on your credit history and score, which means the interest rate is usually higher than secured loans and you could end up paying back more in the long run. Find out more below.
  • The terms of unsecured loans are based on your credit report

  • Unsecured loans are not secured against your property or assets

  • Repayment can be spread over a period of between one and 7 years

  • Interest rates are usually higher than secured loans

  • If you have a bad credit history, your application may be declined, which can lower your credit score

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Representative example: If you borrow £12,000 over 4 years at an interest rate of 16.9% APR (fixed) you would pay £338.36 per month. The total charge for credit would be £4,241.28. The total amount repayable would be £16,241.28


What is an unsecured loan?

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

Unsecured borrowing tends to mean higher interest rates because there is a higher risk to the lender. However, secured loans can be an option for those who do not have assets to secure their borrowing against and can be quicker to put in place.

How do unsecured loans work?

When you take out an unsecured loan, your chosen lender will lend you 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 the lender is taking a higher degree of risk than on a secured loan. If you can’t keep up with repayments, they aren’t able to claim your property or car in lieu, but the lender could take you to court, where you may be liable to a county court judgement (CCJ) or debt collection.

Benefits of choosing an unsecured loan

Unsecured loans are available to many borrowers as repayment is based on your credit history and rating, rather than any assets or property you own. They are usually offered 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 raise your credit score over time – improving your chances of getting better credit in future.

Risks of choosing an unsecured loan

If you have a low credit rating, the interest rates can be substantially higher for unsecured loans, especially if you borrow over a shorter term, meaning you end up paying more back. Missing payments may result in additional fees and charges, which could negatively affect your credit score.

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 unsecured loans.

Applying for an unsecured loan

Before you apply for an unsecured loan, you should make an honest assessment of whether or not you can afford to pay back the loan, including the interest fees – failure to do so can negatively affect your credit score and leave you open to debt collection and court action.

You should also make sure you check your credit report to judge your likelihood of being approved, and check for errors in the information given about you, which could affect your application’s success.

What do I need to apply for an unsecured loan?

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

Once you’ve supplied these online, we’ll be in touch to take the next steps. Ahead of our introductory call, it would 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, it would help speed up the process to gather together the information you have about other existing loans, including repayment costs and loan periods.

Frequently asked questions about unsecured loans

Here are a few of the questions our customers often ask.

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 borrower.

However, if you fall behind on payments or default, your credit rating will be negatively affected.

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, and they have no assets that can be exchanged, the debts will be written off. However, if the deceased has assets, 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 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 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.

What can I use an unsecured loan for?

There are many reasons people choose to take out unsecured loans, including:

Money

Consolidating debts

Consolidate your debts into a single repayment plan and help building a better credit history.
Home

Home improvements

Use your unsecured loan to help add value to your home with a few fix ups or a renovation project.
Buy

Mortgage deposit

Preparing for home ownership and building up the deposit you need is another common reason for this type of loan.

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