Unsecured loan – What it means and where to get the best terms

An unsecured loan is a consumer credit that doesn’t require collateral or a guarantor. It can be used freely for any purpose. In this guide we explain what unsecured loans are, how they differ from secured loans, and where you get the best terms.

What is an unsecured loan?

An unsecured loan is a credit that doesn’t require pledged property (e.g. a home, car) or a guarantor. The lender’s only ”security” is the applicant’s repayment ability and credit record.

Unsecured loans are also called:

• Consumer loans
• Personal loans
• General-purpose loans

Differences between unsecured and secured loans

• Collateral: Unsecured doesn’t require any. Secured requires home, car or other property as pledge.
• Loan amount: Unsecured €100 – €70,000. Secured can be up to a million euros (mortgage).
• Rate: Unsecured rates are slightly higher because risk to the lender is higher.
• Processing time: Unsecured decision in minutes, secured takes days.
• Use: Unsecured always free-use, secured may be tied (e.g. mortgage to property).

Benefits of unsecured loans

• Fast processing – decision often the same day
• No collateral risk – you don’t lose property if you can’t repay
• Free purpose – use the money however you want
• Flexible terms – repayment period 1–15 years
• Completely online – no need to visit a bank

Drawbacks of unsecured loans

• Higher interest rate than secured loans
• Smaller maximum amount – usually up to €50,000–€70,000
• Stricter credit requirements

Who is an unsecured loan good for?

An unsecured loan is a good choice if:

• You need a loan quickly
• You don’t want to pledge your property
• Loan amount is below €70,000
• You have regular income and clean credit records
• You want flexibility in purpose

Where do you get the best terms?

The interest rate range for unsecured loans is wide – from 5% to 49% depending on the lender and credit rating. That’s why comparison is especially important for unsecured loans.

Tips for the best terms

1. Compare effective annual rates – not just nominal rates.
2. Keep credit records clean – payment defaults crash terms.
3. Strong income – permanent employment + regular income improves terms.
4. Suitable repayment period – not too long, not too short.
5. Apply at the right time – don’t leave multiple open applications.

Loan amount and repayment period

Unsecured loans compared on Lainafy typically range:

• Loan amount: €100 – €70,000
• Repayment period: 1 month – 15 years
• Rate from: about 5% with the best credit records

Frequently asked questions

Can I get an unsecured loan without credit records?

All Finnish lenders check credit records before granting a loan. Clean credit records are essentially a requirement for getting an unsecured loan.

Is an unsecured loan a bank loan?

Unsecured loans are granted by both traditional banks and digital lenders. Digital providers are often faster and more flexible.

What can an unsecured loan be used for?

The purpose is always free: renovation, car, wedding, holiday trip, unexpected expenses, or consolidating old loans.