An unsecured personal loan is a way of borrowing money without the need to provide collateral. It is normally possible to get an unsecured tenant loan for between £1,000 and £15,000 over a period of up to five years. Although banks largely control the market, provide a viable peer-to-peer alternative. The absence of security (normally property) means that borrowers will need to have a reliable history of repayments. Lenders are now far more careful since the financial crisis.
Best Buy Low Interest Unsecured Loan Rates
According to the Daily Mail, the average APR on unsecured tenant loans now stands at 12.4%. This is despite the fact that the Bank of England has set base rates at an historic low of just 0.5%. The rate was just 7.6% in 2006. This dramatic rise in interest rates reflects the greater risk of default due to unstable employment prospects. As the economy starts to improve, expect industry competition between providers to help bring down rates to a more acceptable level.
Approval for a Low Rate Unsecured Personal Loan
- Good credit score. Always check for credit report errors and get these corrected. An excellent credit rating will dramatically increase the applicant’s chances of approval for a low APR loan. Credit scoring allows the lender to assess the probability of the borrower defaulting.
- Stable employment. Those who are unemployed, still in their probationary period or in a temporary contract won’t be eligible for an unsecured personal loan. Seek permanent employment before applying for a loan.
- Avoid unnecessary applications. Each application for credit will show on a credit report for a 12 month period. A higher number of applications is likely to lead to rejection. This is because lenders see this as a sign of financial difficulties or even potential fraud.
- Too much debt. The higher the amount of debt, the greater the likelihood that the borrower will find it difficult to make their repayments. If already financially stretched, an additional good credit loan is unlikely to help, unless it is for consolidation. Consider paying off some of the money owed and apply for a loan later on.
Advice on Low APR Good Credit Loans
Those with a late payment may still be accepted, but will pay a higher rate of interest rate. Lenders now use a tiered interest rate structure (referred to as personal pricing) that takes into account the borrower’s circumstances. Avoid taking out an unsecured personal loan for anything other than essential purchases. The reason that the cost of borrowing has increased is because the likelihood of default has risen. It is worth considering taking out loan payment protection insurance in case of involuntary unemployment or poor health. Consider how the repayments will be made if personal circumstances suddenly change.