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What our Nerds say about unsecured loans

Unsecured loans, also known as personal loans, offer a way to borrow money without having to put forward your home or any other asset as security. You can use an unsecured personal loan to help cover a major purchase, perhaps to buy a new car or pay for home improvements. Alternatively, you might want to use an unsecured loan to consolidate your existing debts and make the repayments more manageable.

Tim Leonard Lead Writer at NerdWallet

What is an unsecured loan?

An unsecured loan is a type of borrowing that doesn’t require you to use an asset – such as your home – as collateral. As with most types of loan, you will need to repay the loan in full with interest, usually by making regular monthly payments to your lender. Unsecured loans are also referred to as personal loans.

You may find that you are able to borrow less money and at a higher interest rate than if you took out a secured loan. However, unsecured loans are also considered less risky because you aren’t putting an asset such as your house on the line as a guarantee.

How do unsecured loans work?

When you take out an unsecured loan, you agree with your lender a loan amount and a loan term over which this, plus the interest you’re charged, will be repaid. You’ll then be expected to make repayments to the lender every month until the end of your agreed loan term. At this point everything you owe should be cleared as long as you have maintained your repayments.

Unsecured loan interest rates are usually fixed. This means the amount you must repay each month will stay the same for the duration of the loan term.

How much can you borrow on an unsecured loan?

How much you can potentially borrow using an unsecured loan can vary between lenders, with each typically setting its own upper and lower limits. Generally, unsecured loans tend to be available for between £1,000 and £25,000. However, some lenders might allow you to borrow less and there are others who could potentially let you borrow more, perhaps as much as £50,000. Higher limits may also be available if you’re an existing customer of a bank or lender.

The amount that you specifically are allowed to borrow will depend on your financial situation and the repayments a lender thinks you’re able to afford. How you intend to use the loan might also affect how much you’re allowed to borrow.

You may only be offered the maximum loan amount if you have a good financial standing and credit score, and can prove that you’re able to easily afford the repayments required.

Taking the time to use a personal loan calculator can help you find out what you might be able to borrow and the monthly repayments you might need to make.

How long can you get an unsecured loan for?

Typically, unsecured loans are available for terms of between one and seven years, or sometimes longer. You can choose the term that suits you, although the range available can vary depending on the amount you want to borrow.

How much are unsecured loan rates?

Unsecured loan rates can differ between lenders. Interest rates can also vary according to the amount you want to borrow and for how long.

The interest rate you’re ultimately offered will also depend on your credit score and personal circumstances. Lenders look at your credit history to try to work out how much of a risk they are taking on if they lend to you. Generally, the lowest unsecured loan rates will be reserved for borrowers that a lender considers to represent the lowest risk.

What is an APR in relation to unsecured loans?

The annual percentage rate, or APR, is designed to help borrowers compare unsecured loans and their overall cost. Essentially, the APR shows the cost of borrowing a certain amount for a year, taking into account both the interest rate and any compulsory fees attached to the loan.

Lenders must inform you of the personal APR that you’ll be charged for a loan before you can agree to the loan. This will depend on the size and length of your loan, your personal circumstances and your credit rating.

Where you see a ‘representative APR’ advertised on a loan, this refers to the APR that at least 51% of those who apply for that specific loan will get. In turn, this means that 49% of applicants could be offered a higher APR than that which is being advertised.

What unsecured loans can be used for

Unsecured loans can be used for a wide range of purposes including:

  • buying a car
  • making home improvements
  • consolidating existing debt
  • paying for holidays and weddings

What unsecured loans can’t be used for

There are some things that unsecured loans can’t usually be used for, including:

  • for business purposes
  • for investing, including to buy stocks and shares
  • to buy property or land
  • as a deposit for a mortgage
  • to cover gambling debts
  • for repaying a county court judgment (CCJ)
  • to help purchase something in combination with another loan
  • for timeshares or holiday clubs

Advantages and disadvantages of unsecured loans

There are various advantages of unsecured loans, but some potential disadvantages to be aware of too.

Pros

Some of the potential benefits of unsecured personal loans include that they:

  • give you choice and flexibility over the loan amount and term
  • can be used for a wide variety of purposes
  • don’t require you to put forward an asset as security for the loan
  • usually have a fixed interest rate, giving certainty over monthly repayment amounts
  • can usually be applied for quickly, with lending decisions made in minutes
  • will often deliver funds to your account the same or next day
  • tend to be more widely available than secured loans

Cons

Some of the potential drawbacks of unsecured loans include that they:

  • might require you to have a certain level of income to be eligible
  • may be more difficult to get with bad credit or if you’re self-employed
  • might not be available to you if you have a CCJ or have been declared bankrupt
  • can’t be used for certain purposes, such as for buying property, investing or business reasons
  • often have higher interest rates than an equivalent secured loan
  • tend to offer smaller loan amounts and shorter repayment periods than secured loans
  • may charge a fee if you want to repay the loan early

Can I get an unsecured loan?

Different lenders have their own eligibility criteria for unsecured loans, but generally you’ll need to be a UK resident and hold a UK bank or building society account that can pay direct debits.

Some lenders require that you’re at least 18 years old, while others have a minimum age of 21. There might also be an upper age limit that you’re not allowed to go beyond by the time the loan term ends.

To help prove a loan is affordable, you’ll need to have a regular income above a minimum level – this can vary between lenders. While some lenders prefer this income to come from paid employment or a pension, others also welcome loan applications if you’re self-employed and can provide sufficient proof of regular earnings.

You may also need to prove that you don’t have a history of CCJs, individual voluntary arrangements (IVAs) or bankruptcy. If you do, and your credit score has been negatively affected, you’re likely to find it more difficult to get approval for an unsecured loan.

You can check your eligibility for an unsecured loan without affecting your credit score through our partner, Monevo.

Do I need a good credit score for an unsecured loan?

Having a good credit score could improve your chances of getting approval for an unsecured loan and of qualifying for some of the best unsecured loan rates.

There are also some lenders that specifically state you should have a good credit score if you want to apply for their loans. However, having a less than perfect credit score doesn’t necessarily mean you won’t be able to get an unsecured loan.

Can I get an unsecured loan with bad credit?

While it’s likely to prove more difficult to get an unsecured loan if you have bad credit, there may still be loan options available. Indeed, some lenders specialise in offering bad credit loans to those with poor credit scores.

» COMPARE: Loans for bad credit

How to get the best unsecured loan deals

Being able to compare unsecured loans is the key to getting the best unsecured loan for you. Ensuring your credit score is as good as it can be is also essential, as is the ease with which you’re able to meet the lender’s eligibility criteria.

If you can show you’re able to easily afford the loan, and possess a good credit score proving that you’ve been a reliable borrower in the past, you’ll stand a better chance of securing the lowest unsecured loan rates.

» COMPARE: Unsecured loans

How do I apply for an unsecured loan?

Applying for an unsecured loan can be relatively straightforward if you meet the eligibility criteria for the loan and have certain information to hand. Typically, you’ll need to have ready:

  • your personal details, including name, address and contact details
  • proof of your identity, in the form of your driving licence or passport, and/or a bank statement or utility bill
  • details relating to your financial situation, such as your monthly income and expenditure
  • your employer’s address, if you’re employed
  • your most recent accounts, if you’re self-employed
  • details of any other loans or credit arrangements you might have
  • your bank details

You should also be prepared for a lender to ask permission to conduct a hard credit check. This has the potential to affect your credit score, but is a necessary part of applying for a loan.

All of this information and your credit history will be used by the lender to determine whether you should be offered a loan and the interest rate you’d need to pay if you are.

How fast can I get an unsecured loan?

When you apply for an unsecured loan online, some lenders may decide whether to approve or reject your application in a matter of seconds, while others might take a few days. If you’re already a customer of the bank or lender you’re borrowing from, the approval process may be quicker.

If you get approval, it’s often possible the money will arrive in your account the same or next day.

Should I get an unsecured loan?

Getting an unsecured loan could be a viable option if you have a good reason for wanting a loan and are comfortable you’ll be able to afford the repayments.

Borrowing to buy something that is far from essential and you can’t realistically afford is rarely a good idea. And being able to meet your repayments is vital to making sure you can pay back what you owe. Missing a repayment or even paying late could result in penalty charges and harm your credit score. Affordability is also a vital part of the application process that a lender will check when you apply.

Spending some time considering the different types of loans available can also help you decide if an unsecured loan is definitely what you need. And also consider whether you really need to borrow at all and whether it’s possible you might be better off waiting and saving up the money that you need.

Alternatives to unsecured loans

If you’re not sure whether an unsecured loan is right for you, or are struggling to get an unsecured loan, some of the potential alternatives you could explore include:

Secured loans

A secured loan requires you to put forward an asset that you own, often your house or car, as security against what you borrow. This safety net for the lender to fall back on if you don’t make your repayments means secured loans often come with lower interest rates and are available for larger amounts than unsecured loans. It may be easier to get a secured loan if you have bad credit as well. However, the risk to you as the borrower is that you could lose your asset to the lender if you fail to pay back when and what you should.

» COMPARE: Secured loans

Credit cards

With a 0% purchase credit card you can buy goods and services using the card and won’t be charged interest on what you spend for a set period of time. As long as you pay off what you owe before the interest-free period ends, it’s possible to borrow and avoid paying any interest at all. Be aware that high interest rates can start to apply if you don’t pay your card off in time and interest-free periods won’t be as long as the longest unsecured loans. You might also not be able to borrow as much on a credit card as you can with an unsecured loan.

» COMPARE: 0% purchase credit cards

Overdraft

If you only need to borrow a relatively small amount for a short period of time, you might want to consider using the overdraft on your bank account, if you have one. Importantly, you'll need to check if an overdraft facility is available and the rate of interest payable.

» COMPARE: Bank accounts with overdrafts

Guarantor loans

If you’re struggling to get approval for an unsecured loan, a guarantor loan might be another option. You’ll need a friend or family member to act as your guarantor and effectively promise to repay your loan if you don’t. This safety net for the lender means you might be allowed to borrow where you previously weren’t.

» COMPARE: Guarantor loans

Bad credit loans

When bad credit is preventing you from getting an unsecured loan, you may want to consider a bad credit loan. You can expect the interest rates on these loans to be much higher than if your credit was good but, in the right circumstances, it could provide the lending solution you need.

» COMPARE: Loans for bad credit

Can I repay my unsecured loan early?

You are allowed to repay an unsecured loan early, but you might have to pay an early repayment charge if you do. Generally this will equate to one or two months’ interest, but you should always check the terms and conditions of your loan to find out for sure.

What happens if you don't pay back an unsecured loan?

Failing to keep up with your unsecured loan repayments could result in your lender imposing missed payment fees or increasing your interest rate, and has the potential to damage your credit score. If you miss multiple repayments, the consequences could be even more serious, and might see you default on the loan. Your lender could start legal action against you and appoint a debt collection agency to try to recover what you owe. You could be issued with a CCJ too.

What should I do if I can't pay back my loan?

If you are struggling to pay back an unsecured loan, you should contact your lender to talk through your options. They might agree to a short-term payment break or work out a new payment schedule to help you. But whatever your situation, it’s important to let them know.

If you want additional guidance, there are a number of impartial debt advice charities you could talk to as well.

How to compare unsecured loans with NerdWallet

We’ve partnered with Monevo to make it as quick and easy as possible to compare unsecured loans.

The best way to find the unsecured loans and rates that you’re likely to qualify for is to check your eligibility. Simply tell us the amount you wish to borrow, your reason for wanting the loan, and the term over which you want to repay, and you’ll be on the way to finding the unsecured loan deals that best fit your circumstances.

Or if you’d initially prefer to get a general idea of some of the unsecured loans and rates available in the market today, you can jump straight to our comparison table below. There you’ll be able to easily compare representative APRs, available loan amounts and terms, and sort the listings in the order of your choice.

» COMPARE: Unsecured loans

Unsecured Loan FAQs

How hard is it to get an unsecured loan?

If you have a good credit score, a reliable income, and can prove the loan repayments you would need to make are easily affordable, getting an unsecured loan shouldn't prove too difficult. Where your credit situation is far from perfect or you might struggle to pay back what you borrow, it’s likely to prove more challenging, but shouldn’t be seen as impossible.

Do unsecured loans hurt your credit?

Lenders will often let you check whether you’re eligible for an unsecured loan with a soft credit check, which won’t show on your credit report or affect your credit score. It is usually only when you make a formal application for a loan that a hard credit check will be conducted which will show on your credit report. If a lender sees that you’ve made multiple loan applications in a short space of time, it might be assumed that you’re overly reliant on debt, which could hurt your credit standing.

Once you have an unsecured loan, missing repayments can pose a real threat to the health of your credit score.

About the author

Joel Kempson is a personal finance expert and writer at NerdWallet. He has previously written for Money.co.uk and Uswitch, as well as being quoted in the Daily Express, The Mirror and The Sun. Read more
Tim draws on 20 years’ experience at Moneyfacts, Virgin Money and Future to pen articles that always put consumers’ interests first. He has particular expertise in mortgages, pensions and savings. Read more

Some examples

Here are some examples from UK loan providers that you can compare using the Monevo eligibility service:

    M&S Bank Personal Loan logo

    M&S Bank Personal Loan

    • Representative APR
      4.9% APR
    • Available Amounts
      £1,000 to £25,000
    • Min / Max Terms
      1 to 7 years
    Representative Example: Representative APR 4.9%. Based on a loan of £10,000 over 60 months at an interest of 4.9% p.a. (fixed). Monthly repayments of £187.77. Total amount payable £11,266.20. Maximum APR: 14.9%.
    More info
    Admiral Personal Loan logo

    Admiral Personal Loan

    • Representative APR
      9.9% APR
    • Available Amounts
      £1,000 to £30,000
    • Min / Max Terms
      1 to 8 years
    Representative Example: Representative APR 9.9%. Based on a loan of £10,000 over 60 months at an interest of 9.48% p.a. (fixed). Monthly repayments of £209.91. Total amount repayable before £12,594.60. Maximum APR: 39.9%.
    More info
    Shawbrook Personal Loan logo

    Shawbrook Personal Loan

    • Representative APR
      13.9% APR
    • Available Amounts
      £1,000 to £35,000
    • Min / Max Terms
      1 to 7 years
    Representative Example: Representative APR 13.9% (fixed). Based on a loan of £10,000 over 60 months at an interest of 13.9% p.a. (fixed). Monthly repayments of £227.97. Total amount payable £13,678.20. Maximum APR: 29.9%.
    More info
    • Broker
    Post Office Money Personal Loan logo

    Post Office Money Personal Loan

    • Representative APR
      14.9% APR
    • Available Amounts
      £1,000 to £25,000
    • Min / Max Terms
      1 to 7 years
    Representative Example: Representative APR 14.9%. Based on a loan of £4,000 over 36 months at an interest rate of 14.9% p.a. (fixed). Monthly repayments of £136.65. Total amount payable £4,919.47. Maximum APR: 29.9%.
    More info
    • Peer To Peer
    Zopa Personal Loan logo

    Zopa Personal Loan

    • Representative APR
      17.9% APR
    • Available Amounts
      £1,000 to £25,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 17.9%. Based on a loan of £10,000 over 60 months at an interest of 17.9% p.a. (fixed). Monthly repayments of £246.27. Total amount payable £14,776.43. Maximum APR: 34.9%.
    More info
    My Community Finance Personal Loan logo

    My Community Finance Personal Loan

    • Representative APR
      18.85% APR
    • Available Amounts
      £1,500 to £25,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 18.85% (fixed). Based on a loan of £6,000 over 48 months at an interest of 18.85% p.a. (fixed). Monthly repayments of £173.64. Total amount payable £8,335. Maximum APR: 39.9%.
    More info
    Oakbrook Personal Loan logo

    Oakbrook Personal Loan

    • Representative APR
      19.9% APR
    • Available Amounts
      £1,000 to £10,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 19.9%. Based on a loan of £5,000 over 48 months at an interest of 19.9% p.a. (fixed). Monthly repayments of £147.71. Total amount payable £7,090.08. Maximum APR: 34.9%.
    More info
    BetterBorrow Personal Loan logo

    BetterBorrow Personal Loan

    • Representative APR
      23.7% APR
    • Available Amounts
      £1,000 to £12,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 23.7%. Based on a loan of £5,000 over 42 months at an interest of 23.7% p.a. (fixed). Monthly repayments of £170.31. Total amount payable £7,153.02. Maximum APR: 39.8%.
    More info
    Abound Personal Loans logo

    Abound Personal Loans

    • Representative APR
      24.8% APR
    • Available Amounts
      £1,000 to £10,000
    • Min / Max Terms
      1 to 3 years
    Representative Example: Representative APR 24.8%. Based on a loan of £2,000 over 36 months at an interest of 24.8% p.a. (fixed). Monthly repayments of £76.75. Total amount payable £2,763.00. Maximum APR: 24.8%.
    More info
    KOYO Personal Loan logo

    KOYO Personal Loan

    • Representative APR
      29.9% APR
    • Available Amounts
      £1,500 to £12,000
    • Min / Max Terms
      6 months to 5 years
    Representative Example: Representative APR 29.9%. Based on a loan of £6,000 over 48 months at an interest of26.45% p.a. (fixed). 47 scheduled monthly payments of £201.79 and a final payment of £201.29. Total amount payable £9,685.42. Maximum APR: 37.9%.
    More info
    • Only available to homeowners
    Oplo Personal Loan logo

    Oplo Personal Loan

    • Representative APR
      30.8% APR
    • Available Amounts
      £2,000 to £15,000
    • Min / Max Terms
      2 to 6 years
    Representative Example: Representative APR 30.8%. Based on a loan of £6,915 repayable over 47 months at an interest rate of 13.92% pa (fixed). 46 monthly payments of £240.33 and a final payment of £240.33. Total amount payable £11,295.71. This includes an acceptance fee of £395. Maximum APR: 30.8%.
    More info
    Finio Personal Loan logo

    Finio Personal Loan

    • Representative APR
      39.9% APR
    • Available Amounts
      £1,000 to £10,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 39.9%. Based on a loan of £2,000 over 24 months at an interest of 39.9% p.a. (fixed). Monthly repayments of £116.07. Total amount payable £2,785.68. Maximum APR: 69.9%.
    More info
    Lifestyle Personal Loan logo

    Lifestyle Personal Loan

    • Representative APR
      49.9% APR
    • Available Amounts
      £1,000 to £5,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 49.9%. Based on a loan of £3,000 over 36 months at an interest of 49.9% p.a. (fixed). Monthly repayments of £146.37. Total amount payable £5,269.32. Maximum APR: 49.9%.
    More info
    118 118 Personal Loan logo

    118 118 Personal Loan

    • Representative APR
      49.9% APR
    • Available Amounts
      £1,000 to £5,000
    • Min / Max Terms
      1 to 3 years
    Representative Example: Representative APR 49.9%. Based on a loan of £2,000 over 24 months at an interest of 41.2% pa (fixed). Monthly repayments of £123.64. Total amount payable £2,967.43. Maximum APR: 79.9%.
    More info
    Bamboo Personal Loan logo

    Bamboo Personal Loan

    • Representative APR
      59.7% APR
    • Available Amounts
      £1,000 to £8,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 59.7% (fixed). Based on a loan of £3,000 over 30 months at an interest of 47.73% p.a. (fixed). 29 Monthly repayments of £173.02 and a final payment of £172.92. Total amount payable £5,190.50. Maximum APR: 69.9%.
    More info
    • Only available to NHS/Public sector workers
    Salad Money Personal Loan logo

    Salad Money Personal Loan

    • Representative APR
      74.9% APR
    • Available Amounts
      £500 to £1,000
    • Min / Max Terms
      12 to 18 months
    Representative Example: Representative APR 74.9%. Based on a loan of £1,000 over 18 months at an interest of 57.24% p.a. (fixed). 17 monthly repayments of £87.57 and a final repayment of £79.94. Total amount payable £1,568.63. Maximum APR: 74.9%.
    More info
    Minty Personal Loan logo

    Minty Personal Loan

    • Representative APR
      98.1% APR
    • Available Amounts
      £1,500 to £3,000
    • Min / Max Terms
      2 years
    Representative Example: Representative APR 98.1%. Based on a loan of £2,250 over 24 months at an interest of 44.4% p.a. (fixed). Monthly repayments of £177. Total amount payable £4,248. Maximum APR: 98.1%.
    More info
    Everyday Loans Personal Loan logo

    Everyday Loans Personal Loan

    • Representative APR
      99.9% APR
    • Available Amounts
      £1,000 to £15,000
    • Min / Max Terms
      1 to 5 years
    Representative Example: Representative APR 99.9% (fixed). Based on a loan of £3,000 over 24 months at an interest of 71.3% p.a. (fixed). Monthly repayments of £237.75. Total amount payable £5,706. Maximum APR: 299.8%.
    More info

If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.

Our service is free of charge but we receive commissions from the providers we refer you to. This table is initially ordered by representative APR. You can use the options above the table to order it according to various criteria. You may be offered different rates depending on your personal credit rating.

Our comparison service features a selection of providers from whom we receive commission.

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Monevo.co.uk is a registered Trading Name of Monevo Limited which is an Appointed Representative of Quint Group Limited, and is entered on the Financial Services Register under reference number: 723672.  Quint Group Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference number: 669450.  Monevo Limited is registered in England and Wales (Company number 06511345). Registered office: Glasshouse, Alderley Park, Nether Alderley, Cheshire,SK10 4ZE.  Licensed by the Information Commissioners Office, (Registration number Z1498441).

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