What is an unsecured personal loan?
First things first – an unsecured personal loan is sometimes just called a personal loan. With these types of loans, you’re borrowing money without having to offer up any assets as security. Put simply, unsecured loans are an agreement made in good faith between you and the lender – they’ve loaned you the money on the basis that you agree to pay it back within the timeframe you’ve promised.
A secured loan on the other hand means that you’re borrowing money using your assets as security – for example, your house. This basically means that if you can’t pay back your loan, the lender can take possession of your asset (in this example, your home). Because the stakes are so high, you’ll usually be able to borrow more money with a secured loan than an unsecured one.
Even though an unsecured loan doesn’t require you to offer any security, the lender still has a legal right to take back their money in some way if you can’t make the repayments. This could mean that the lender arranges a County Court Judgement (CCJ) against you and having a CCJ listed on your credit report is something you really should try to avoid.