Lenders such as banks and building societies offer unsecured loans. The size and term and hence the monthly repayments will vary dependant on the purpose of the loan. For some lenders the maximum amount and term over which the unsecured loan is repaid will not be the same for new car loans which may be offered over a three to four year term. As against loans for holidays or travel which may be restricted to a 12 or 24 month term.

Some reasons such as purchase of timeshare property or business purposes are not suitable subjects for unsecured loans. An unsecured loan is a debt that is not secured against any asset or equity. But don't be misled by the name, unsecured loans as with any debt, can be recovered through court proceedings. The courts have the powers to enforce sale of your home to repay such a debt.

You should therefore ensure that you can afford to keep up the payments on these loans before accepting them. Loan companies act quickly in cases of non-payment and your home is still potentially at risk in these circumstances.

Unsecured personal loans are normally made at a fixed interest rate, repayable on a monthly basis over a fixed term. An unsecured loan is a debt that as the name implies is not secured against any asset or equity, such as your property. This means if you fail to make repayments the lender will have little option but to sue you in the county courts to recover their money.

Lenders charge you interest on the amount borrowed, this is expressed in terms of the Annual Percentage Rate (APR). APRs were introduced to help borrowers compare the true cost of borrowing a given sum over the life of the loan including the loan interest rate and any additional charges. The normal limits for unsecured personal loans are between £500 to £25,000 over a term of 6 months to 25 years, however 6 months to 30 months are most common. The terms offered by individual lenders and their products will differ dependant upon the type of business they are trying to attract.

As a rule it is advisable to compare the quoted APR's when deciding the competitiveness of unsecured loans from different companies. When lenders quote their APR's they should state if these are "typical rates" or if one rate applies to all successful applicants, regardless of their personal circumstances and the purpose. The "typical" rate is a loan rate that is offered to over half of successful applicants at the time, but the exact rate offered to you will depend on your personal circumstances. As there are so many personal loan products available you should be careful to understand the basis upon which you agree to repay the debt.

Although most unsecured loans are offered at a fixed interest rate and repayments for these loans will stay the same throughout the length of your loan, some lenders offer a variable loan rate. As the name implies the interest rate may rise or fall usually in line with any changes to the base rate made by the Bank of England during the term of your loan. Some lenders may permit over-payments and lump sum payments, which allow you to clear the unsecured loan over a shorter term than that agreed at the from the start.

If this is what you want it is VERY important to check before signing the agreement because some lenders will charge you a penalty for repaying all or part of your loan early and this charge can be as much as 2 month's interest or more. Lenders may offer "payment breaks" or "repayment holidays" as part of their personal loan package and which means you can take a break from your repayments at the beginning of the unsecured loan or at any agreed point during the repayment period. These may be arranged with the lender at the outset to coincide with holiday times such as August or December so you have more money for those holiday times.

You will still be charged interest during these payment holidays so you should be sure to understand the effect on your debt of taking advantage of this facility. If for any reason you have an impaired credit history, unsecured loans can be difficult to obtain, and you may be forced to pay a fairly high rate of interest to find a lender willing to meet your needs. In these circumstances you should be particularly careful because if you act in haste you may end up paying inflated loan rates for what may seem good at the time but you will regret it later.