An loan for items such as cars, holidays or debt consolidation, is one where no collateral is secured. As a result, finance of this type generally features higher interest rates than secured finance, due to the fact that no collateral is secured on the borrowed amount. They are not available for business purposes and some other uses may also be excluded, for example the purchase of timeshare properties. The repayment term available may depend on the purpose for which you require the loan, and may be restricted accordingly. For example, loans for cars may be restricted to a 36 or 48 month term.

A fixed interest rate will stay the same throughout the term, regardless of any changes in the bank base rate. If the rate offered is a variable rate, it may rise or fall in line with any base rate changes during the term. The lender may permit over-payments and lump sum payments, which allow you to clear the loan over a shorter term than that agreed at the outset. Lenders may offer ‘repayment holidays’ as part of the package and these allow you to take a break from your repayments at the beginning or at any agreed point during the term.