Secured loans vs unsecured Loans

The main difference between secured and unsecured loan options is that a secured loan is taken out against an asset, whereas unsecured loans are not. Because of this security, it also means that generally you can borrow a higher amount with a secured loan and benefit from a much longer repayment period with lower interest rates.

Secured loans are usually used for much bigger purchases and expenses, such as getting a new kitchen or home extension. This type of loan can be secured against your home, car, jewellery, or other assets to the value of the loan amount.

Because a secured loan is secured against an asset, this is viewed as a ‘less risky’ option for the lender. Typically this is reflected with lower rates of interest on a secured loan compared to an unsecured one. However some secured loans are repaid over a long period, so overall interest costs need to be considered too.

On the other hand, generally featuring lower amounts and shorter repayment periods, unsecured loans are typically used to cover ‘smaller’ borrowing needs.

118 118 Money loans are offered on an unsecured basis, so there is no need to secure this borrowing against any asset (missed or late repayments will incur a £12 charge).

Can I get an unsecured loan with bad credit?

Firstly, there is no such product called ‘an unsecured bad credit loan’. But there are some lenders whose products cater for those with bad credit, for ease of use these are naturally referred to as bad credit loans. They tend to be traditional loans, but as they are aimed at those with either bad, low or no credit, they are often labelled as unsecured loans for bad or poor credit. They often function under the same premise as a traditional loan, so they are likely to be fixed term and fixed rate loans, very similar to those loans provided by high street lenders too. Examples of this are payday loans which are borrowed for a short period but have a high interest rate.

So yes, you can get a loan if you have an imperfect credit past, but the rates you’re likely to be eligible for may be higher than if you have a good credit profile.

118 118 Money’s personal loans range from £1,000 to £5,000 repaid over 12 – 36 months, and yes, we do consider applications from those who don’t have a perfect credit past. We don’t guarantee success when applying, but you can use our pre-application eligibility checker to see if you’re likely to be accepted or not.

Are unsecured loans available without a credit check?

No. All regulated lenders are legally bound to complete a full credit search if you apply for a loan, secured or unsecured. Credit searches are undertaken by lenders to ensure that you can commit to the credit agreement and the loan amount is affordable. Lenders refer to the information held at credit reference agencies which provide them with a view to your credit history. If you’ve had missed or late repayments, these are all visible on your credit file.

Credit searches are also done to ensure your personal information matches up with the information held at credit reference agencies, this is also done to prevent fraudulent applications.

Many lenders including 118 118 Money offer a pre-application eligibility check service, this provides you with some indication if you’re likely to be accepted or not without the need for a full credit search. This is beneficial if you have poor credit history as you don’t want too many searches on your credit file over a short period as this impacts your credit score negatively.

However, should you be approved for a 118 118 Money unsecured loan using the eligibility checker and you decide to complete a full application, we will conduct a full search; this will be visible to other lenders thereafter.

Are unsecured loans with no-guarantor available?

Guarantor loans — which are co-signed by a third party like a family member or friend — may provide you access to credit with a favourable interest rate, especially if your guarantor has a better credit rating than you. But that's not the only way to get a loan. Even if your credit score isn’t great, 118 118 Money makes it possible to take out unsecured loans with no guarantor needed.

Unsecured loans with no guarantor offer an option if you don’t feel comfortable asking a friend or family member to act on your behalf. At 118 118 Money, we pride ourselves on helping out those who are struggling to get credit or may have been turned down by their bank. Use our eligibility check to assess your chances of being accepted for one of our unsecured loans with no guarantor.

What can an unsecured loan be used for?

An unsecured loan can be used for a variety of purposes. These can range from home renovations and extensions or in some cases, to spread the cost of large purchases.

These types of loans can also be used to cover emergency needs such as a car repair or replacing household goods.

Debt consolidation is another use, by consolidating your debts you may find the monthly repayments are lower.

Given the loan amounts can range from relatively small to much larger amounts, these types of loans are widely available through many high street lenders as well as specialist online providers who may cater for those with low or no credit history.

118 118 Money considers applicants from an imperfect credit past; however we don’t guarantee eligibility as this is dependent on a number of different factors. You could use our eligibility checker to see if you’re likely to be accepted or not, this is done without affecting your credit rating. A full application does require a full credit check.

Are there any alternatives to an unsecured loan?

We recommend you do your own research, but yes, there are alternatives.  The amount you need to borrow and how you can repay may ultimately dictate whether any of the alternative options are suitable. As will your own credit history and the amount you can afford to repay back monthly. So if you require a larger loan but you have a bad credit history then the options are quite limited as you can seem a risky borrower.

If you think securing an asset is an option, then a secured loan can be an alternative that allows you to access larger loans.

If the loan amount you require is relatively small, then short term loans are another option, but these types of loans – albeit unsecured – generally do come with a high interest rate.

Alternatively, dependent on the amount of money you need to borrow, credit cards are also another option. Like all other lines of credit, your own credit history will be also considered. So if you have a less than perfect history, you may find the options available through a credit card can also be limited.

However, 118 118 Money also offer credit cards, and we do consider applications from those who may have had credit related issues in the past. This may be an alternative if you require a smaller amount of borrowing. The 118 118 Money Simple Interest Rate Credit Cards comes with a credit limit of up to £1,200 and a representative 49.0% APR (variable). You can use our eligibility checker to see if you’re likely to be eligible for our credit card, this doesn’t impact your credit score – a full application requires a credit search. This will be visible to other lenders too.

Is an unsecured loan an option for me?

Whether these types of loans are an option is dependent on your own personal circumstances, and we recommend doing as much research as you can.

At 118 118 Money, we offer unsecured loans to UK residents from £1,000 to £5,000 with fixed monthly repayments spread over 12 - 36 months. Use our eligibility checker to find out what your repayments would be based on the amount borrowed and length of repayment.