Unsecured loans do not require the borrower to give property as collateral for the loan. These types of loans come with a certain degree of risk for the lender and the assessment criteria is generally stricter. The lender usually ascertains that the borrower has a good credit history and is earning enough to meet the loan requirements.

While lenders like building societies and high street banks are commonplace, there are specialist lenders who offer unsecured loans where the high street branches sometimes do not. The failure of the latter to provide loans at times could be either through restrictive criteria or their inclination to specialise in a certain type of borrower, e.g. company directors, tenants, the self-employed, people with mortgage arrears, a bad credit history, County Court Judgements (CCJ's) et al.

Without the hassle of security, unsecured loans are comparatively quicker to arrange than secured loans; funds are available within 48 hours of being approved by the lender.Loan terms are normally a reflection of the risk profile of unsecured loans; and without the backup of security, lenders allow lesser amounts as loans and charge a greater interest rate. Unsecured loans usually have fixed terms and fixed interest rates that are repaid monthly.

The size of the unsecured loan is characteristically smaller – the maximum allowed is around £ 15,000 - than that of a secured loan. Hence, the term is shorter, generally up to 5 or 10 years.

Although security over a home is not necessary, lenders are more inclined towards homeowners than other borrowers. On the face of it, unsecured loans are less risky to the borrower. However, it is best to be vigilant with payments, as court proceedings ultimately take the borrower's assets into account when recovering outstanding balances.

Unsecured loans can be used for a range of purposes, like buying an automobile, going on vacation, home improvements etc.