What is the minimum and maximum loan amount for an unsecured loan?
An unsecured, or personal, loan is a relatively small value borrowing that can be spent on whatever you wish – providing that it is within the law! This loan type is set at a fixed interest rate over a fixed repayment term of between 1 and 5 years. This structure helps the borrower to effectively budget for their debt as the repayment amount is unchanging every month. An unsecured loan is usually taken out for amounts between £1000 and £25,000. Because the loan is not attached to any collateral, this type of lending is risky for a lender. For this reason, the loan acceptance is usually based on the applicants’ credit score. Those with the most favourable credit scores will benefit from the most competitive interest rates, as their credit reference report displays a proven track record of successfully managing debt.
In most cases those who wish to borrow more than £25,000 will be required to secure this lending against an asset to reduce the risk to the lender. This way, if the borrower fails to make the repayments, their property can be repossessed by the lender in order to cover the costs. This type of lending is known as a secured loan.