An unsecured personal loan is - simply - a loan which isn't backed by collateral. In effect, an unsecured loan means that someone is borrowing money without offering anything in return if they fail to pay the loan back.

An unsecured personal loan allows you to borrow up to £25,000 and pay it back over a repayment period of up to 10 years.

Hmmmm. Still not sure what it means?

The easiest way to explain it is to consider the opposite sort of loan: a secured loan.

In a secured loan, someone is lent money against collateral (commonly a house - a homeowner loan). In a secured loan, if the borrower fails to pay back the loan to the lender, the lender can claim the asset (the house) by way of repayment.

That's why homeowner loans always come with the standard health warning: "YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT."

A secured loan allows you to borrow up to £25,000 and pay it back over a repayment period up to 25 years,

So what's the point on unsecured personal loans

Well, the risk to the lender (e.g. Halifax, Virgin, Northern Rock, etc.) is greater if you take out an unsecured loan, because if you fail to pay it back they won't get your assets.

Because of this, unsecured personal loans tend to be more expensive (i.e. they offer you a higher APR). That's the important bit.

There's loads of unsecured loans about, and you can use Loan Genie's search loans tool to find and compare 'em. Have fun!