An unsecured loan is a loan that you can apply for that does not require details of an asset to be provided as security for the loan (such as a property or a car).
Typically unsecured loans can be used for a range of purposes like travelling or consolidating debt.
The interest rate on an unsecured loan can be higher than the interest rate on some other loans (such as home loans) because there’s no security held against the loan.
What types of unsecured products are there?
Typically unsecured products include:
- Unsecured personal loans
- Personal overdrafts
- Credit cards
What can you use an unsecured loan for?
There are requirements around what unsecured loans can be used for, typically they’re used for one-off purchases rather than day-to-day spending. Some acceptable purposes are:
- Paying for a wedding
- Taking a holiday
- Consolidating debt
- Buying a car (a secured personalloan may be an option in some cases and may offer a lower interest rate)
- Home renovations (a home loan may be an option in some cases and may offer a lower interest rate)
What are the benefits of an unsecured loan?
Unsecured loans may offer more flexibility than secured loans. The application process may be simpler as you don’t need to provide details of the asset you are using to secure the loan. There may also be more flexibility when it comes to making additional repayments. See more about the differences betweenunsecured and secured personal loans.
