There are two primary kinds of loans available on the market today – secured, and unsecured loans. Secured loans are loans in which some type of collateral is used to hold the loan; usually this is the borrower’s home, or perhaps a car in the case of hire purchase. If the borrower defaults on the loan, the lender has the option of taking possession of the collateral. Unsecured loans, on the other hand, do not require collateral to obtain.

Secured Loan Limits and Lenders

In most cases, lenders limit the amount of unsecured loans to between £15,000 and £20,000. Unsecured loans can be used for any reason, from taking the vacation of your dreams to having a medical procedure done, to starting a new business to consolidating debt. Although the lender may ask you what you plan on doing with the money on the loan application, really it is up to you how you use the money once you receive it.

Common lenders for unsecured loans are banks, credit unions, online loan companies and specialist lenders. Generally, lenders want you to have good to excellent credit before they will lend you money for an unsecured loan. You must also be able to demonstrate that you are gainfully employed and can afford the loan payments.

Online lenders often offer better terms than banks or credit unions. Additionally, the application process is often very fast and easy. Generally, you only need to fill out an online application and provide details such as your employment information, the amount of money you want to borrow and what you intend to do with the money. In some cases, you will need to fax a copy of your most recent pay slip to the lender. With online lenders, applications are often approved within 24-48 hours and the money is transferred into your bank account right away.

Despite the ease with which online loans can be arranged, due care should be taken to avoid “Pay Day” loan companies, whatever your circumstances. With typical APR’s in the region of 2,000-8,000% it is an extortionately expensive way of obtaining a loan for longer than a few days and despite the welcoming façade such companies present, they remain dangerous traps to the unwitting.

For individuals who are self employed, it may be necessary to use a specialist lender for an unsecured loan. Specialist lenders are often more willing to work with individuals who are considered high risk, such as individuals who do not have a long credit history or whose income is less stable due to self employment. If you are self employed, you may need to supply copies of your tax returns or business accounts for the past several years to prove your income.

Smart Use of Unsecured Loans

If you decide you want to take out an unsecured loan, do not borrow more than you can afford to repay, and consider other means of raising required capital such as saving. If you fail to meet the terms of the loan, it could be detrimental to your credit history. Even late payments will have a negative impact on your credit and influence your ability to get a mortgage or car loan in the future.

Unsecured loans are often for a term of between two to 10 years and are at a fixed rate of interest. If you find yourself having problems making payments, contact your lender immediately. Lenders are often more willing to work with you to renegotiate the loan if you communicate with them openly and honestly as soon as possible.

Before taking out an unsecured loan, shop around different lenders to find the best loan terms possible. Make sure you completely understand the terms of the loan before signing the loan documents and accepting any payments. A  final precautionary tale to shopping around is that that quoted APR’s are not necessarily the rate you will receive, and applying for a loan will impact your credit rating as it will record a search, even if you later choose not to go ahead with it.

If like me, you had a vague recollection of something happening about automatic credit limit increases at some point in the recent past when you read the title of this post, you’d be right. But what was it that changed, specifically? Can you remember?

Good. It’s not just my memory that is failing in my mid-20′s old age then!

I had a letter from Barclaycard today sporting the bold headline “Important news about your Barclaycard credit limit”, which immediately filled me with a minor sense of dread, and a great deal of curiosity. Were they moving it down? Why would they do that (other than “because they can”, of course)? Not that a reduced credit limit would annoy me for any particular reason other than a feeling of them casting a minor slight on my character.

My Assumption

I didn’t think they’d be moving it up, because they weren’t allowed to any more, were they?

But it appears I was wrong; both in my assumption that they’d be reducing my credit limit and in they can’t just put up your limit randomly. The next line (in considerably smaller print I might add) quietly whispered “Good news, from 2 September 2011 your credit limit will be increased from £x,xxx to £xx,xxx.

After I had picked my jaw up off the floor, I began a Google hunt with ideas floating through my mind that they couldn’t do this. I remember Martin Lewis over at Money Saving Expert campaigning to ban just this very practice. And I further recalled, or so I thought, that he’d been successful?

So just what were Barclaycard playing at?

The Reality

Having done a lot of digging, the result (taken from a leaflet PDF published by The UK Cards Association) seems to be that I was half right. Credit Card companies can still randomly increase your credit limit if they choose, but they must notify you separately from your usual statement letter, and give you at least 30 days in which to decline the offer. This is still therefore an “opt-out” method rather than “opt-in”, so far from ideal.

Currently they can say “Hey, you… your credit limit is going up. Well done! If you don’t fancy it though, ring our premium rate number”. Who will bother to not accept it? I think I’d prefer them to write to customers and say “Hey, you… you’re eligible for a credit limit increase. If you want it, give us a shout”.

But I suppose in the grand scheme of things, this wouldn’t earn them nearly as much profit and that’s what credit card companies are all about at the end of the day.

Remember, credit card companies are not your friend! But thanks for the increase anyway.

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Every Friday I publish “Frugal Friday!“, an open-ended series with some of the simple and best ways to really save you money both now and in the future.

This Friday I am concentrating on reducing electricity bills. Here in the UK winter-time is traditionally the time of higher energy usage: the elderly use electric blankets, whole families have home lighting left on for longer as British Summer Time draws to a close, and we are generally stuck inside for the evenings more often requiring entertainment.

There are some simple steps you can take (and some cool gadgets you can buy without guilt!), to help lessen the impact of this seasonal increase in our home carbon emissions courtesy of our electric usage.

Check Your Tariff

Before last year, there was massive competition in the domestic supply market with various “lock in” and “fixed” deals. You may well have switched, I know I did. The fix on those tariffs has come to a close now though and prices are floating upwards so it’s time to get switching again.

There are hundreds of sites that will likely find you something cheaper; some good starting points are GoCompare, CompareTheMarket, and uSwitch. Don’t forget to finally go via QuidCo to get any cashback available, too!

Energy Saving Lightbulbs

Fairly obvious this one, and easy to achieve. Morrison’s just last week had an offer on of 4 for £1, and not low-quality either. As the nights get longer, more retailers will be trying to tempt us, so keep your eyes peeled. Even if you pay full price for them though you will still make a saving. The average bulb lasts for 5 years of normal use and consumes between 11 and 17 watts.

By switching all the bulbs in your house to low-energy equivalents, you could save around £112 a year and up to a whopping £307 over the life of a typical 8,000 hour bulb.

Turn Them Off

When you leave a room, turn the light off. Sounds so simple but take a moment and think – in the depths of winter – how often do you walk/drive/cycle around and think half of the houses you come across look like they are attempting to imitate the Blackpool Illuminations? Why pay even a reduced amount to keep an unoccupied room lit?

This can be a challenge with children, but with a little perseverance even the family dog can probably manage to turn the light out when it has finished in the kitchen. Your moody teenager may require slightly more effort.

Kill The Standby

Televisions, DVD players, computers, Satellite, Cable, modems, microwaves, food mixers, video recorders, printers, even modern intelligent washing machines and dishwashers. It’s amazing what has a ‘standby’ mode these days. When standing by, ready for action, these devices are still sucking electricity and adding to your bills yet giving little to no benefit. Switch them off at the wall when you are done using them and again save upwards of £50 over the course of a typical year.

The Bye Bye Standby Energy Saving Kit takes the hassle out of such energy efficiencies by automatically killing the power for you when the device enters standby. It even comes with a handy remote to remotely control whatever you plug into it.

Monitor Your Usage

Last year, I got an Owl Cm119 Wireless Electricity Monitor, and they are absolutely fabulous. You can literally see, in real time, just how much money is being wasted in your home – and perhaps more impressive – see the difference after your efforts. The device pays for itself inside the first month or two, and you can find yourself doing seasonal challenges if you are not careful!

Banish the Tumble

As convenient as the tumble-dryer may be, it costs pounds to use every time. Pop the clothes out on the line if the weather is nice and get nicer clothes that last longer, dried for free courtesy of mother nature. Even if it is windy but lacking in sun you’ll be surprised how quickly clothes can dry in the open air.

Fridge & Freezer

If your freezer requires it, keep it defrosted regularly. Any build-up of ice means it has to work harder, consuming more electricity. If your fridge is regularly half-empty or more, fill it with water-filled bottles. These will help keep the inside temperature stable and reduce the effects opening and closing the door have. If your appliance(s) are older, when replacing ensure you get A-rated.

Never put warm or hot items in your fridge or freezer, either. Not only will this play havok with the internal temperature, it can take hours for your appliance to restore the previous temperature and damage food already within as well.

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