Finding the best deals on personal loans
Personal loans can be used for anything from a world holiday to a brand new boat. An unsecured loan, also known as a signature loan or personal loan, is a loan that is not backed by collateral. Unsecured loans are based solely upon the borrower’s credit rating. As a result, they are often much more difficult to get than a secured loan, which also factors in the borrower’s income. A secured loan is generally considered to be a cheaper option and carries less risk to the borrower.
Because of this increased ‘risk’ (compared to secured loans) unsecured lenders tend to have stricter underwriting rules. In particular, lenders will look at the potential borrower’s credit history and how they have conducted their previous and current credit or loan accounts. The lender will decide, based on their borrower’s credit history, how likely are they to repay the loan. If the risk is too high, the borrower will be declined for the loan. If the risk is acceptable, then the lender will (subject to other minimum requirements) make a loan offer.
What will the Interest Rate be?
Assuming a loan offer is made, the actual APR will normally depend on two things, the loan amount and that level of risk. Generally speaking, the higher the loan amount the lower the APR will be. In terms of the level of risk, the higher the risk the higher the APR lenders will charge – this is known in the loan industry as rate-for-risk.
Personal Loan Deals
To get the best deals on personal loans it pays to have a good credit rating. However, whatever your situation you can find the best deal by comparing the many different lenders as possible. This way you can compare features such as interest rates, terms of the loan, fees and charges to make sure you are getting the very best deal on your unsecured personal loan.