Personal loans are available on either a secured or an unsecured basis. If a borrower does not have an asset to act as collateral against the value of a secured loan they may apply for an unsecured loan. The features of an individual loan package will depend on a number of factors. These include an applicant’s credit score, the amount borrowed, the repayment term and its provider.

With an unsecured loan, the maximum sum that can be borrowed is £25,000, with many lenders not offering more than £10,000. The repayment term will be short, with a maximum length of ten years. When compared to a secured loan, unsecured borrowing is less competitive. However, good deals are available if you know where to look.

The key features to look out for when selecting an unsecured loan are the Annual Percentage Rate (APR), repayment term and hidden charges. It is worth noting that a ‘typical’ APR is the rate offered to the majority and not all of successful applicants, whilst a set APR is offered to all successful applicants. For this reason, to get a realistic comparison of the type of deal each provider is prepared to offer, a borrower should make a full loan application. If a lender advertises their loan rate using a monthly interest rate rather than an APR, a borrower should enquire about the APR to ensure a fair comparison can be made. It is easy for a lender to mislead shoppers with a low initial monthly interest rate, which soars a few months later and remains high for the rest of the repayment term.

Loan repayments will be more affordable if a loan is taken over a long repayment term, although, the overall cost of borrowing will be more than with a short term. Money may be saved if a borrower is able to make over-payments or even pay their loan off early. For this reason, it is important to make sure that there are no hidden charges in the small print of a loan contract, such as over or early payment fees or a loan set-up fee.

A good credit rating will secure a borrower the best rates and terms. Bad credit borrowers are best advised to apply for a bad credit unsecured loan. With such, the APR will be higher and the terms less flexible, but acceptance is far more likely than with a standard unsecured loan.

Whatever a borrower’s personal circumstances are, to secure a good value deal, loan packages should be compared between many different providers.