Unsecured Personal Loans
If you’re looking to take a risk-free loan, or just don’t have any collateral, unsecured personal loans should be on your list. Not to worry, many lenders are willing to offer you loans without having to include your title or car logbook.
We hook you up with all you need to know about this loan product and some of the top lenders with irresistible deals on the market. Take a look.
- Rep APR
- Amount
- Desired Credit Score
Payoff
- 5.99 - 24.99%
- $5,000 - $40,000
- $5,000 - $40,000 640
Upgrade
- 7.99 - 35.97%
- $1,000 - $50,000
- 580
Marcus
- 6.99 - 19.99%
- $3,500 - $40,000
- 660
- APR range
- Fees
- Terms
- Amounth
- Unemployment protection
Bank 1
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 2
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 3
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Table of Contents
What Is an Unsecured Personal Loan?
An unsecured personal loan is one in which you won’t need to pledge any property inform of security or collateral. That makes them less risky to the borrower since you won’t lose your asset should you fail to repay.
However, they are considered high-risk loans by lenders since they don’t have any guarantee that you’ll repay your loan. Nonetheless, there are still other debt recovery options they can explore such as commissioning a collection agency, or worse, suing you.
Because you don’t offer any collateral, your approval, thus, depends on your creditworthiness. And, the approval process is mostly stricter, depending on the lender.
Common unsecured personal loans are student loans and credit cards.
There are still other debt recovery options they can explore such as commissioning a collection agency, or worse, suing you.
Requirements to qualify
Different lenders have different laid-out requirements for approval of personal unsecured loans. Here are the most common;
- You should be 18 years and above
- You should be a legal resident of the US
Lenders will also check your credit score. Because they are high-risk loans, lenders will require that you have an excellent credit score to be approved.
You can also still qualify for a personal unsecured loan with a bad credit score. However, you’ll have limited options, and might end up paying higher interest rates.
Other lenders will also need to see proof of income. A stable income increases your chances of approval.
Differences between secured and unsecured personal loans
Confused between the two? Check out the difference;
| Secured | Unsecured |
|---|---|
|
You’ll need security to apply. You can pledge your house, car, or any other asset to act as collateral. |
You don’t need security to apply. |
|
Often carry low-interest rates. Since lenders can possess your property and sell it when you default payment, they are considered low-risk by lenders, hence attracting low-interest rates. |
They carry higher interest rates. Lenders consider them as high-risk loans. |
|
Your collateral plays a major role in not only if you’ll get a loan, but how much you’ll get and the interest rates charged. |
Your credit score is the main consideration for approval. Lenders will easily offer you a loan if you have an excellent credit score. |
|
Secured loans are easier to qualify for. |
Your collateral plays a major role in not only if you’ll get a loan, but how much you’ll get and the interest rates charged.
Your credit score is the main consideration for approval. Lenders will easily offer you a loan if you have an excellent credit score.
Secured loans are easier to qualify for.
Lenders are stricter. They’ll look at your credit score, income stability, and debt-to-income ratio.
|
|
You don’t need a guarantor to apply for a loan. |
You can choose to find a guarantor to act as security for your loan. This will help especially when you have a poor credit score. Alternatively, you can find a cosigner with a stellar credit profile to act in good faith. |
|
You don’t need a guarantor to apply for a loan.
You have access to larger loan limits. Depending on the value of your security, the lender can be willing to offer you even larger loans. |
Since they are risky, lenders tend to be very cautious with how much they can offer a borrower. It’s even harder with a poor credit profile. |
Types of Unsecured Loans
If you’ve settled for unsecured loans, here are some of the loan products you can try out;
Student loans
These are loans borrowed to fund the borrower’s education. They are only available for students and come with unique features you can hardly find in other loan products.
Student loans have very flexible repayment terms. Lenders often allow borrowers some grace period before they can start repaying their loans.
They carry lower interest rates, and lenders offer interest subsidies.
In case you’re wondering, student loans are easier to qualify for. Lenders are mostly not concerned with your credit profile, as long as you’re a student.
Credit cards
Unlike in other loan products where you get the amount applied in a lump sum, credit cards are meant to take care of your recurrent purchases.
You typically borrow every time you’re using your card for shopping or in businesses that accept credit cards.
The lender sets a limit according to your credit profile and repayments are often monthly.
Credit cards carry high-interest rates. You’ll want to consider that before taking one. They could also easily mess up your credit profile should you use more than you can repay.
Personal Line of Credit
Unlike ordinary loans where you receive all the cash at once, in a personal line of credit, the borrower receives a certain amount of the one approved by the lender.
The borrower then uses this to take care of their needs, and as they do so, the remaining amount will still be available for borrowing.
They could also easily mess up your credit profile should you use more than you can repay.
How much can you borrow?
You can borrow from as low as $500 to as high as $100,000.
How much you can borrow with unsecured personal loans depends entirely on your creditworthiness. Therefore, the higher your credit score, the higher your loan limit.
To improve your chances of a higher loan limit, first, keep track of your credit report and credit score by FICO.
Once that is done, work on boosting your credit health. You do this by repaying your debts on time. For credit cards, don’t use past 30% of your available credit. Leave your old credit cards open and instead open new ones whenever you need and can afford one.
Avoid getting caught in too many debts. And, as you wait to boost your credit score, you can get a co-signer with a good credit profile to help you apply.
Avoid loans with exorbitant interest rates, high fees, and short repayment terms. Search for a suitable lender with better terms.
Where to get Unsecured Personal Loans
The following are some of the lenders who can offer you unsecured personal loans;
- Banks: Banks are some of the most common sources of unsecured loans. They have a stricter application process and prefer borrowers with excellent credit scores. Their requirements differ from one lender to another
- Credit unions: Credit unions also offer unsecured loans. They are less strict and offer lower interest rates. They also offer better terms to borrowers with excellent credit scores. Their application process is also highly convenient.
- Online lenders: these are the most common lenders for both secured and unsecured personal loans. Application is online making the process quick and convenient. They are also less strict and you can easily get a loan. Online lenders also check borrowers’ credit profiles and will offer better terms for borrowers with a stellar credit score.
In case you don’t qualify for the loan in banks, you can try out credit unions and online lenders. While at it, focus not only on how much you can apply but the lender’s terms, too.
Pros and Cons
| Pros | Cons |
|---|---|
|
Less risky: since you don’t offer anything as collateral, you avoid the risk of losing it should you miss out on your loan repayment. |
High-interest rates: Unsecured loans carry higher interest rates since they are risky to lenders. |
|
Flexibility: these loans aren’t tied to specific uses. You can use them to offset other loans, pay medical bills, sponsor your education, improve your home, or sponsor a wedding or a vacation. However, borrowing for leisure activities such as vacations is strongly discouraged. |
|
|
Easier application process: Online lenders and credit unions offer online application which is faster and convenient. Banks, however, insist on an in-person paper application. |
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Frequently Asked Questions (FAQ)
It means you don’t need any collateral to apply. You, therefore, won’t need to pledge your car, house, or any other asset while applying for the loan.
Yes. Different lenders have different requirements for borrowers. However, your creditworthiness is the most crucial requirement. Lenders will look at your credit score (strive to keep it above 600), debt-to-income ratio, and repayment history.
Yes, both negatively and positively. During application, the lender will carry out a hard inquiry on your credit profile, which costs you some score. On the flip side, during repayment, the lender will regularly update your credit profile hence building it.
Your credit score is the main loan qualification requirement. The higher your credit score, the better. A credit score above 600 will win you better terms and higher loan limits. The lenders we pointed above prefer an average score of 600. If yours is lower, you can still get a loan by getting a co-signer.
You can borrow from $5000 to $100,000 with the lenders above.
