Loan interest rates

Due to the fact that unsecured personal loans require no collateral for security, they present lenders with a greater risk than secured loans. In the case of a loan secured against your property such as your house, if ever you default on the loan for some reason the lender has at least the option (in dire cases) of simply repossessing your property to settle your debt.

Because of this greater amount of risk to lenders, unsecured loans will usually have higher interest rates compared to secured loans. One thing to keep in mind when comparing interest rates between unsecured loans from different companies is that these are usually given for promotional purposes. In other words the actual rates of interest may be higher than what’s advertised, especially since the interest rate customers are offered will all be based on their individual circumstances and credit score. A better gauge of finding out how much the loan will cost is the Annual Percentage Rate or APR.

APR takes into account all the costs and charges associated with the loan, thus providing you with a more accurate idea of how much the loan will really cost you. Loan companies are required to disclose the APR of a loan.

How much interest is charged to you for an unsecured loan depends on several factors. All lenders have a basic interest rate based on the amount you want to borrow, but your own particular financial and personal situation will carry a significant weight in determining the final interest rate you are offered. Credit score, credit history, current debts and liabilities, as well as your employment status are all taken into consideration by the loan company in order to determine the interest rate that applies to your loan.