Unsecured Loan

Unsecured loans are personal loans without security in which the lender has no claim on a homeowner's property should they default on repayments. Instead, the lender relies solely on the ability of a borrower to make their agreed repayments. As a result, the limit on unsecured loans is substantially lower than their secured counterparts, typically $50,000 maximum. Repayment periods range from anywhere between 6 months and 10 years.

Unsecured loans are usually offered by traditional financial institutions such as banks and credit unions, and more recently by the larger supermarket chains. This type of loan can also be called a signature loan.

The interest charged on unsecured loans can either be fixed or variable and is expressed as an APR (Annual Percentage Rate). The APR will vary depending upon the loan amount and term. The rate is most commonly fixed, which means that loan repayments remain the same throughout the period of the loan. However, long-term loans may have variable interest, so it important to establish and understand the terms of the loan agreement before committing.